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2022 Supreme(Online)(Guj) 6569
HIGH COURT OF GUJARAT
BHARGAV D. KARIA, J
PANCHMAHAL DISTRICT CO.OP. BANK LTD – Appellant
Versus
STATE OF GUJARAT – Respondent
SPECIAL CIVIL APPLICATION NO. 14441 of 2013
For the Appellants/Petitioners: MR Y J PATEL
For the Respondents: MR KRUTIK PARIKH, MR MASOOM K SHAH
Directors cannot be held personally liable for company debts without proven membership or personal guarantees.
Headnote:(A) Constitution of India - Article 227 - Challenging order of Gujarat State Co-operative Tribunal - The petitioner challenged Tribunal's order dismissing their claim against directors of the borrower for outstanding loan recovery on the grounds of lack of evidence showing their membership of the bank. (Paras 6, 7, and 9)
(B) Jurisdiction of Co-operative Tribunal - The Tribunal held no individual liability existed for the directors as no evidence of personal guarantees was provided by the bank, emphasizing the need for valid proof of membership before imposing liabilities. (Paras 6.1, 10)
Facts of the case:
The case involved a loan dispute where the bank sought to recover outstanding dues from the members of the borrowing co-operative. The Tribunal found no evidence proving the directors’ membership status.
Findings of Court:
Evidence was lacking to establish the alleged personal guarantees and membership required for individual liability under the applicable provisions of law. No basis for appeal was found.
Issues: The primary issue centered on whether the directors of the borrower could be held liable for the loan without evidence of their membership or personal guarantees.
Ratio Decidendi: The court ruled that in the absence of documented proof establishing personal liability or membership, the Tribunal's dismissal of liability was appropriate.
Result: Petition dismissed.
| Table of Content |
|---|
| 1. loan agreement and borrower default. (Para 4) |
| 2. tribunal overruled previous decree due to lack of membership evidence. (Para 5) |
| 3. no personal liability without membership proof. (Para 6) |
| 4. the existence of evidence required for claims against individuals. (Para 7 , 8) |
| 5. tribunal's decision upheld; petition dismissed. (Para 9 , 10 , 11) |
JUDGEMENT
1. Heard learned advocate Mr. YJ Patel for the petitioner and learned AGP Mr. Krutik Parikh for the respondent no.1. and learned advocate Mr. Masoom Shah for respondent nos. 2,3.1,3.2,3.3,4 and 5. Though notice has been served none appeared on behalf of respondent no.6.
2. Having regard to the controversy involved in this petition in a narrow compass, the petition is taken up for final hearing with the consent of both the sides.
3. By this petition under Article 227 of the Constitution of India, the petitioner has challenged the order dated 26.02.2013, passed by the Gujarat State Co-operative Tribunal (for short ‘ the Tribunal’) below Exh. 18 in Appeal No. 109 of 2010, whereby Judgment and Award dated 10.12.2008, passed by the Board of Nominees, Godhra in Lavad Suit no.
269 of 2006 was set aside qua the respondent nos. 2 to 5 herein who were the original defendants nos. 2 to 5 before the Board of Nominees in Lavad case and the appellants before the Tribunal.
4. The brief facts arising to this petition are as under:
4.1 The respondent no.6- Anavarpurar Adivasi Majur Sahakari Mandli Ltd (for short ‘the borrower’) availed a loan of Rs.40,000/- from the petitioner- Bank at the rate of 16% for a period of one year.
4.2 Respondent no.6- borrower executed relevant documents like promissory note wherein, respondent no.2 to 5 have signed as in the capacity of Chairman, Secretary etc. of the respondent no.6- borrower. The respondent nos. 2 to 5 have also singed letter dated 14.11.1991 as authorised members of the respondent no. 6-borrower.
4.3 At this juncture, it is relevant to note that on page no.5 of the petition, it appears that petitioner has made misstatement that:
- “it is further submitted that on 14.11.1991 respondent no.2 to 5 had also purchased share of Rs.2000/- from the bank and declared as shareholder of the petitioner-Bank ....” This statement is not supported by any of the documents produced on record as well as same is contrary to the findings to the fact arrived at by the Tribunal in the impugned order.
4.4 It appears that respondent no.6-borrower had obtained further financial assistance from the petitioner-bank in the years 1992 and 1993. Thereafter it could not repay the loan.
4.5 Lavad suit no.269 of 2006 was filed by the petitioner in the Board of Nominees, Godhra under Section 99 (4) of the Gujarat Co-operative Societies Act, 1961 (for short ‘the Act, 1961) to recover the outstanding dues of Rs.15,15,515/- with interest. The Board of Nominees by the Judgment and Award dated 10.12.2008, passed the decree against the respondent nos. 2 to 5.
5. Being aggrieved by the Judgment and Award passed by the Board of Nominees, the respondent no. 2 to 5 preferred an appeal before the Tribunal being Appeal No.109/2010. The Tribunal vide impugned order dated 26.02.2013, quashed and set aside the Judgment and Award passed by the Board of Nominees so far as the respondent nos.2 to 5 are concerned, on the ground that there is no evidence on record to show that respondent nos. 2 to 5 are the members of the petitioner- Bank and there is no documents on record to show that the respondent nos.2 to 5 have executed any personal guarantee in favour of the petitioner Bank with regard to the outstanding dues of the respondent no.6- borrower.
5.1 The Tribunal has also considered the fact that the Board of Nominees have passed the Judgment and Award dated 10.12.2008 without assigning any reason and without application of mind accepting the documents produced on record by the peti
