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SCA/4260/2009 33/ 37 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 4260 of 2009
With
SPECIAL
CIVIL APPLICATION No. 6978 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE JAYANT PATEL
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
DEPOSIT
INSURANCE & CREDIT GUARANTEE CORPORATION - Petitioner(s)
Versus
STATE
OF GUJARAT, SECRETARY, AGRICULTURE & COOPERATIVE DEPT. & 6 -
Respondent(s)
=========================================================
Appearance
:
MR SOPARKAR With
MR
AMAR N BHATT for
Petitioner(s) : 1,
MR KAMAL TRIVEDI, LD ADV. GENERAL WITH VISHEN,
AGP for Respondent(s) : 1, (in both the matters for State
Authorities)
RULE SERVED for Respondent(s) : 2,
MR JR NANAVATI
WITH MR DHARMESH V SHAH for Respondent(s) : 3(for Liquidator in
both),
MR VK SHAH with MR HB KALMESH & MR UMANG R VYAS for
Respondent(s) : 4,
MR TUSHAR MEHTA WITH MR KETAN D SHAH for
Respondent(s) : 5,
MR BS PATEL for Respondent(s) : 6,
MR UMANG
H OZA for Respondent(s) : 7,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE JAYANT PATEL
Date
: 23-26/02/2010
COMMON
ORAL JUDGMENT
As in both the matters, common questions arise for consideration,
they are being considered by this common judgement.
The short facts of the case appear to be that the petitioner is a
Statutory Corporation governed by the provisions of Deposit
Insurance and Credit Guarantee Corporation Act, 1961 (hereinafter
referred to as ‘DICGC Act’ for short). The contesting respondent in
Special Civil Application No.4260 of 2009 is Liquidator of Visnagar
Nagrik Cooperative Bank Limited and in Special Civil Application
No.6978 of 2009 contesting respondent is Liquidator of General
Cooperative Bank Limited (for the sake of convenience, hereinafter
shall be referred to as ‘the Bank concerned’). It is an admitted
position that both the Banks are insured Cooperative Banks governed
by the provisions of Section 115A of the Gujarat Cooperative
Societies Act, 1961 (hereinafter referred as ‘the Act’) and both the
banks are ordered to be liquidated under the Act and the respective
Liquidators are holding the charge of the affairs of both the Banks.
It appears that the Liquidator of the Banks, in exercise of the
power under Sections 107 to 115 of the Act fixed up the priority by
the respective impugned decision and in the said decision the
Liquidator has put up the claim of the petitioner Corporation in the
category of creditor after secured creditor and the Government dues
as well as the claim of the workers. It is under these
circumstances, the Corporation has approached this Court by the
present petitions, contending, inter alia, that it is having the
statutory priority for the claim made by it on the basis of the
amount paid by it to the deposit holder to the extent of insured
amount.
Heard Mr.S.N. Suparkar, learned Counsel appearing with Mr.Amar
Bhatt, learned Counsel for the petitioners, Mr.Kamal Trivedi,
learned Advocate General appearing with Ms.Vishen, learned AGP for
the State and its Authorities, Mr.Nanavati, learned Counsel
appearing with Mr.Dharmesh Shah for the Liquidator in SCA No.4260 of
2009 and Mr.Mehul S. Shah, learned Counsel for the Liquidator in
SCA No.6978 of 2009, Mr.B.S. Patel, learned Counsel for Mehsana
District Cooperative Bank and Mr.Tushar Mehta, learned Additional
Advocate General for Ahmedabad District Cooperative Bank and State
Cooperative Bank.
It appears to the Court that three aspects deserve to be considered;
one is the mode and manner of exercise of power by the Liquidator
while fixing the priority of the claim of various classes of
creditors; the second aspect is the priority as may be available in
the liquidation proceedings of an insured Bank; and the third is the
placement in the priority list to the claim of the petitioner
Corporation amongst various classes of creditors.
The examination of the first aspect shows that as per the Scheme of
the Act, the Liquidator is to be appointed by the Registrar for the
affairs of the Society, which is ordered to be liquidated. The
powers of the Liquidator are provided as per Section 110 of the Act.
Such powers are subject to the Rules and general supervision,
control and direction of the Registrar. Under the Gujarat
Cooperative Societies Rule, 1965 (hereinafter referred to as ‘the
Rules’ for short), the procedure pertaining to the liquidation is
contemplated under Rule 46 onwards. However, Rule 46 to 50 do not
expressly provide for controlling the power of the Liquidator under
Section 110(e) and (f) of the Act and Sub-rule (2) of Rule 48
provides for the money to be realised from the members and past
members for the power to be exercised by the Liquidator under
Section 110(h) of the Act. Section 110(e), which is relevant for
the present petition reads as under:-
Sec.
110 Powers of Liquidator;-
The
Liquidator appointed under Section 108 shall have power, subject to
the rules and the general supervision, control and direction of the
Registrar;-
(a)
xxx
(b)
xxx
(c)
xxx
(d)
xxx
(e) to
investigate all claims against the Society and, subject to the
provisions of the Act, to decide questions of priority arising out
of such claims and to pay any class or classes of creditors in full
or ratably according to the amount of such debts, the surplus being
applied in payment of interest from the date of liquidation at a
rate approved by the Registrar, but not exceeding the contract
rates.
The
aforesaid provisions enables the Liquidator to decide the questions
of priority arising from the claims made before him and consequently
to pay any class or classes of creditors according to the amount of
such debts. The language of Section 110(e) of the Act speaks for
(i) various types of claims; (ii) any class or classes of creditors;
and (iii) various types of such creditors within same classes, if
any. Of course, such power is subject to the Rules and the general
supervision, control and direction of the Registrar, but in absence
of any specific order by the Registrar, it would be for the
Liquidator to exercise the power as per the provisions of Section
110(e) of the Act.
It
can hardly be accepted that the liquidation proceedings of any
society would be altogether different than that of any insolvency
proceedings either under Provisional Insolvency Court Act or
Presidential Insolvency Court Act or the Winding Up of any Company.
The laws prevailing in the matter of insolvency proceedings or in
the matter of winding up proceedings would be required to be taken
into consideration by the Liquidator while classifying the creditors
and tracing the debts of such creditors. It is only thereafter the
priority is to be fixed by the Liquidator. Even at the time of
fixing the priority the laws relating to the insolvency proceedings
and winding up proceedings are required to be taken into
consideration by the Liquidator but it is only when there are valid
reasons for making departure therefrom or there is any express
statutory provisions may be by way of State Act or Central Act, the
departure therefrom may be permissible. Otherwise in normal
circumstances, it would be expected for the Liquidator to go by the
priority as may be available to different classes of creditors for
their different debts in the insolvency proceedings or winding up
proceedings. Therefore, it is not possible to hold that the
Liquidator of each Society or each Bank has power to decide the
priority of various classes of creditors separately or classify
various debts separately for satisfying the claims against the
Society. If such power is read, it will not only create an
anomalous and ambiguous situation, but it will leave room for
arbitrary exercise of power in liquidation proceedings of each
Society by the Liquidator. Therefore, it will have to be held that
the Liquidator of the Society having same nature for exercise of
power as Liquidator in the same category of the Society, would be
required to exercise the power for fixation of the priority, keeping
in view the laws prevailing in any insolvency proceedings or the
proceedings relating to winding up of the company. It cannot be
said that the claims of any creditor as prevailing under the common
law or under any other law is to be ignored and the Liquidator
enjoys the power to surpass or nullify the same. The Liquidator
while exercising the power for priority has to be guided and
governed by the rights as may be available of the creditor against
the Society for enforcement or recovery of such debts. However, in
a case where the statute or by any Act express priority is provided,
it will be required for the Liquidator to respect the same and to
abide by the same. But in absence of any express priority by any
statute, for various classes of creditors, the Liquidator will be
required to fix the priority, keeping in view the laws relating to
insolvency proceedings and the laws relating to winding up of a
company. Of course, the same as observed earlier, is subject to a
very strong reasons for making departure therefrom in any individual
case, provided there is a support of express provision of any State
Act or Central Act made for such purpose.
The
aforesaid takes me to examine the second aspect about the
identification of various classes of the creditors, including their
respective debts. The debts can broadly be classified into secured
debts and unsecured debts. In the same manner the creditors can be
classified broadly into two categories; secured creditors and
unsecured creditors. It is within those two classes there may be
the crown debt as the secured or the crown debt as unsecured
creditor. If by express provisions of statute the charge is created
over the property for any revenue or taxes or other Government dues,
it can be termed as crown debt as secured creditor and amongst
secured creditors, the crown debt having secured by way of express
charge provided by any statute will have priority over other (other
than crown) secured creditors. Same position will prevail for two
categories within the classes of unsecured creditors namely; the
debts of crown as unsecured creditor and the other debts (other than
that of the crown) as unsecured creditors. The crown debt as
unsecured creditors will have priority over other unsecured
creditors. It may also be recorded that the claim of any of the
secured creditors will be to the extent of security so available and
to the extent of security interest created therein and once the
security is exhausted or the interest is satisfied, the remaining
part of the debt would be classifiable as unsecured debt. The
Liquidator, therefore, while exercising the power of fixation of
priority will be required to take into consideration the aforesaid
various classes of creditors and the assets of the society or the
bank will be required to be distributed accordingly either in full
or rateable as per the category of such debt and to the extent
available therefrom.
At
this stage reference to the decision of this Court in the case of
Patel Dayabhai Ramji v.
Manager, in Special Civil Application No.13181 of 2004 decided
on 12.1.2010 in the matter of insolvency proceedings for considering
the rights of the secured creditor would be relevant.
In the said decision, this Court had observed at paragraphs 7, 8,
9, and 10 as under:-
7. The
relevant aspect in the present case is that whenever any property of
the person who is declared insolvent is taken over by the Receiver
or the officer of the Court appointed for such purpose, the same
would be available to the extent of the interest held by the
insolvent in such property. If the rights of any third party exists
in the property or a
bar or a clog
is operating over
the title of the insolvent in such property, such would be required
to be taken care of by the Court at the time when the money
is to be appropriated. As per the provisions of the Transfer of
Properties Act, once a mortgage is created by any person in favour
of the mortgagee, interest in the property to that extent is created
and the rights of the owner in the property to that extent shall
vest with the mortgagee subject to the provisions of the Transfer of
Properties Act. If such insolvent who is mortgagor has to sell the
property, he will have the rights to sell the property subject to
the mortgage or the rights of the mortgagee and such rights in the
property to that
extent would be available to the Insolvency Court for realization of
the property of the insolvent unless the transaction
of such mortgage is declared as fraudulent or void or set aside by
the Insolvency Court in such proceedings. It is not the case of any
parties to the proceedings that the transaction of mortgage was by
way of fraud or the transaction was fraudulent or void or otherwise.
Therefore, proceedings on the basis that there was valid mortgage in
favour of the bank executed by the deceased pertaining to the
property, which has subsequently vested to the
legal heirs of the deceased, the resultant effect would be that the
insolvents were holding the property subject to
the rights of the mortgagee. Under such situation, the Receiver
though might have taken possession of the property and though might
have sold the property of the insolvents, the money available for
distribution as per the provisions of Section 61 would be after
satisfying the encumbrances or the rights of the mortgagee to the
extent created in the property prior to the requisite period for
which the bar operates against the insolvent and in any case on the
date when the person is declared insolvent and his property is taken
over by the
Receiver of the Insolvency Court.
8. The
aforesaid appears to be the position
as per the Transfer of Properties Act and for the rights in the
property of the insolvent. If the provisions of Section 61 is
examined in light of the aforesaid position of law, to be
considered as per the provisions of Transfer of Properties Act, it
would appear that the distribution of the property as provided
under Section 61 on the basis of the priority of the debt is to
be considered qua the absolute property or qua the rights under
the Transfer of Properties
Act. To say in other words, even if the property is held by the
insolvent, but once the mortgage is proved, such property
would be available to the extent minus the rights of the mortgagee
in the property as available under the Transfer of Properties Act.
Further, the pertinent aspect is that Section 61 of the Provincial
Insolvency Act is not with a non-obstacle clause or the legislature
did not intend to have the overriding effect over any other law for
the time being in force which may include Transfer of Properties
Act. Therefore, in view of the aforesaid position, the question of
priority in payment would be required to be considered from
the money realised of the property of the insolvent minus the
rights of the mortgage in such property. As such, the interest
created in favour of the mortgagee by the insolvent prior to the
declaration as insolvent unless the transaction is held to be
fraudulent or void, voidable, cannot be equated with the word debts
fully . The mortgagee is having a secured interest in the
property and the amount payable by the insolvent to the mortgagee
cannot be only termed as debt. But the rights are additionally
available to the mortgagee having created secured interest for
which the
property as per the provisions of the Transfer of Properties Act.
Therefore, the net effect of the aforesaid is that the amount
recoverable by such mortgagee will be above the priority
contemplated under Section 61 of the Insolvency Act.
9. At
this stage, the reference may be made to the provisions contained
in the Companies Act, 1956, for availability of the rights of the
secured creditors as per the provisions of Section 529 and over the
preferential payments available under Section 530. This Court in the
case of Textile Labour Association Vs. The Official Liquidator of
Rajpur Mills Ltd. (in Lqn.) in Company Application Nos.358/08 &
allied matters, decided on 04.08.2009, the debt of the workers in
addition to the pari passu and if yes, to what extent, at para 7 in
the said decision observed thus-
Therefore,
it appears that as per Section 529, rights of secured and unsecured
creditors as in force for the time being under the law of insolvency
with respect to the estates of persons adjudged insolvent, are
required to be observed. If
the matter is considered for the respective rights of the secured
creditors, they would be entitled to foreclosure of the mortgage and
the Company in liquidation would be entitled to redemption of the
mortgage by payment of
the full amount. It is by now well settled that the rights of the
secured creditor would stand above the rights of the preferential
creditors under Section 530 as
well
as unsecured creditors.
It is only
by way of statutory provision of Section 529A of the Act which
begins with the non-obstacle clause, the workers’ dues are to be
treated at par with the secured creditors and for such pari passu
payment, the debts of the workers’ dues and all the secured
creditors as per Section 529A of the Act are given priority above
all other debts. It is not in dispute that the debt under Section
529A of the Act are not satisfied. Therefore, in the present group
of matters, the Court may not be required to examine the aspects of
priority of the workers’ dues and secured creditors under Section
529A of the Act over the other debts falling in the category of
Section 530 of the Act and also of other unsecured creditors. It
appears from the conjoint reading of Section 529 read with Section
529A of the Act that Section 529A is carving out an exception
to the rights of secured and unsecured creditors under Section 529.
Therefore, if the provisions of Section 529A of the Act is to be
implemented, Section 529 would not operate as a bar. However,
after the satisfaction of the debts under Section 529A of the Act,
the effect is required to be given to the provisions of Section 529
of the Act. As observed earlier, Section
529 of the Act saves the rights of the secured and unsecured
creditors as are for the time being in force. To say in other
words, the rights of the secured creditors are above the unsecured
creditors as they have interest in the property of the Company in
liquidation for which the security is created. It is only between
the rights of secured and unsecured creditors, Section 530 may have
role to play for preferential payment amongst the unsecured
creditors.
Therefore, the creditors who may fall in the
category of secured creditors would be to the extent of their
security, above the creditors falling under Section 530 of the Act
and other unsecured creditors. Therefore, it appears that if on
account of
the implementation of the provisions of Section 529A of the Act, if
the secured creditors have not been able to realise the full money
from their security, after payment to the workers at pari passu, if
the surplus/balance amount remains, which is realised from the
security of the secured creditors, the same may be claimed by the
secured creditors in the capacity as secured creditors who otherwise
could not recover the amount from their security in view of the
provisions of Section 529A of the Act. To say in other words, if
the secured creditors have to recover the amount of Rs.100/- for
satisfying their outstanding dues and on account of the inclusion of
the claim of the workers for pari passu payment under Section 529A,
they have received lessor amount, such amount would be available to
the secured creditors, provided there is surplus/balance
after compliance to the provisions of Section 529A of the Act and
such remaining amount is a part of the amount realised from their
security. Therefore, the first question shall stand answered
accordingly. The aforesaid shall hold good for realisation of the
amount by the secured creditor upto the date of winding up of the
Company in liquidation. (emphasis
supplied)
Therefore,
in view of the aforesaid observations and discussions, the
conclusion would be that the Bank in the capacity as secured
creditor was entitled to have the payment of its outstanding amount
of
the Award of the learned Nominee from the money realised by sale
of the property and the balance, if any, available could be
distributed
amongst other debtors which may include the decree holder who are
respondents in the present proceedings, but the premise on the
basis of which the learned Judge has passed the order of not at all
considering the claim of the priority for availability of the
payment to the secured creditor who is Bank in the present case,
could be said to be an error apparent on
the face of the record committed by the learned Civil Judge in the
Insolvency Proceedings. It was required for the learned
Judge to consider the aforesaid aspects and to make the fund
available for satisfaction of the interest of the secured creditor
who is Bank in the present case and thereafter, the balance if any
available could be distributed amongst the other creditors, which
includes the creditor
holding decree who are respondents in the present case.
The aforesaid
would show that in the insolvency proceedings or in the proceedings
of winding up of a company, the normal priority has to be as under:-
(1) Secured
debts of the crown or the State may be by way of a security created
as per Transfer of Properties Act or may be by way of express charge
created by any statutory provisions to such Government dues, subject
to the conditions of the quantum of such debt or to the extent of
such security available, whichever is less.
(2) Secured
debt of any private person or any other Institution, subject to
conditions of the quantum of such debt or to the extent of such
security available, whichever is less.
(3) Workers/employees
dues.
(4) The
aforesaid two categories of secured debts may be considered on pari
passu basis with the workers/employees dues.
(5) Crown/State
dues (unsecured)
(6) Unsecured
debt of other private person.
The
aforesaid may be the position in liquidation proceedings of a
Cooperative Society. However, so far as Cooperative Banks and more
particularly insured Banks are concerned, the claim of depositors
may stand in priority above other unsecured debts, but next to
unsecured Government/Crown debts. The aforesaid appears to be
reasonable to be incorporated, keeping in view the provisions of
Section 43A of the Banking Regulation Act, 1949 (hereinafter
referred to as BR Act ). It is true that Section 43A of the
Act applies to the Banking company and by virtue of Section 56 of BR
Act only certain provisions of BR Act applies to Cooperative Banks
for its functioning. However, if for other banks, which includes
other banking companies, the Parliament by legislative provisions
has given priority to the deposits, after payment of preferential
creditors under Section 530 of the Companies Act, which is
equivalent to unsecured Government debts, there is no reason for not
to apply such priority to the depositors while getting back the
money from such cooperative banks, when the payment is to be made to
unsecured creditors. Therefore, the claim of depositors may stand
in priority over other unsecured debts of private persons. The last
would be the distribution of share money amongst the shareholders of
the Society.
The
aforesaid can be a broad parameters for the Liquidator to decide the
priority generally for cooperative societies and specifically for
cooperative banks, which are also otherwise governed by the
provisions of BR Act as per the observations made hereinabove.
The
aforesaid takes me to examine the question for consideration of the
priority claimed by the petitioner Corporation. Section 21 of DICGC
Act is heavily pressed in service by the learned Counsel for the
petitioners read with Regulation 22 of the Deposit Insurance and
Credit Guarantee Corporation Regulation, 1961. The same for ready
reference reads as under :-
Section
21 Repayment of the amount to Corporation.-(1) Where any
amount has been paid under Sec. 17 or Sec. 18 or any provision
therefor has been made under Sec. 20, the Corporation shall furnish
to the liquidator or to the insured bank or to the transferee bank,
as the case may be, information as regards the amount so paid or
provided for.
(2) On
receipt of the information under sub-section (1), notwithstanding
anything to the contrary contained in any other law for the time
being in force,-
(a)
the liquidator shall, within such time and in such manner as may be
prescribed, repay to the Corporation out of the amount, if any,
payable by him in respect of any deposit such sum or sums as make up
the amount paid or provided for by the Corporation in respect of
that deposit;
(b) the
insured bank or, as the case may be, the transferee bank shall,
within such time and in such manner as may be prescribed, repay to
the Corporation out of the amount, if any, to be paid or credited in
respect of any deposit after the date of the coming into force of
the scheme referred to in Sec. 18, such sum or sums as make up the
amount paid or provided for by the Corporation in respect of that
deposit.
Regulation
22. The amounts repayable to
the Corporation under sub-section (2) of section 21 of the Act shall
be paid from time to time by,-
(a) the
liquidator as soon as the realisations and other amounts in his
hands, after making provision for expenses payable by that time, are
sufficient to enable him to declare a dividend of not less than one
paisa in the Rupee to each depositor.
(b) the
insured bank or the transferee bank, as the case may be, as soon as
the realisations and other amounts in his hands, after making
provision for expenses payable by that time in respect of such
realisations or other amount in its hands are sufficient to enable
it after the date of coming into force of the scheme referred to in
section 18 of the Act, to pay or credit in respect of each depositor
a sum not less than one paisa in the Rupee.
At
this stage, reference may also be made to Section 115A(5) of the
Act, which read as under:-
115A
Order for winding up, reconstruction, supersession of committee,
etc., of insured co-operative bank not to be made without sanction
or regulation of Reserve Bank of India;-
Notwithstanding
anything contained in this Act, in the case of an insured
co-operative bank-
1. xxx
2. xxx
2A xxx
3. xxx
4. xxx
5. the
liquidator or such bank or the transferee bank, as the case may be,
shall be under an obligation to pay the Deposit Insurance
Corporation established under the Deposit Insurance Corporation Act,
1961 (47 of 1961), in the circumstances, to the extend and in the
manner referred to in section 21 of the Act.
Explanation:-
In this section:-
a) the
expression ‘insured co-operative bank’ means a society which is an
insured bank under the provisions of the Deposit Insurance
Corporation Act, 1961 (47 of 1961)
b) the
expression ‘transferee bank’ in relation to an insured co-operative
bank means a co-operative bank –
(i) with
which such insured co-operative bank is amalgamated, or
(ii) to
which the assets and liabilities of such insured co-operative bank
are transferred, or
(iii)
into which such insured co-operative bank is divided or converted,
under sub-section (1) of section 17]
The
aforesaid provisions of Sub-section (5) of Section 115A of the Act
creates an obligation upon the Liquidator of an insured Cooperative
Bank to pay the petitioner Corporation the amount in the
circumstances and to the extent and in the manner referred to in the
aforesaid Section of 21 of DICGC Act. If provisions of Section 21
of the Act are considered, it creates the right in favour of the
petitioner Corporation to have the repayment of the amount paid by
it to the depositors of the insured Bank. It is with an intention
of creating the right of repayment, the Parliament has used the
language under Sub-section (e)(2) of Section 21 Notwithstanding
anything to the contrary contained in any other law for the time
being in force . Therefore, by virtue of the said language right
of repayment of the amount paid by the Corporation is created.
Clause-A of Sub-section (2) of Section 21 obliges the Liquidator to
repay such amount to the Corporation within such time and in such
manner, as may be prescribed. The time for making payment and the
manner of making payment has been prescribed by Regulation 22.
Regulation 22 (Clause-A) provides that after making provision of
expenses payable by the Liquidator, when the money is sufficient to
enable him to declare dividend of not less than 1 paisa in the rupee
to each depositor, such repayment is required to be made by the
Liquidator. Therefore, the liability on the part of the Liquidator
to pay such amount to the Corporation would accrue; (1) after making
provision for expense payable by that time and (2) when fund is
sufficient to enable him to declare a dividend of not less than 1
paisa in the rupee to each depositor. Both the aforesaid conditions
as prescribed by the Regulation are required to be satisfied and it
cannot be segregated as sought to be contended by the learned
Counsel for the petitioner.
The
contention of the learned Counsel for the petitioner was that after
making provisions for expenses payable by that time, the Liquidator
has to discharge the liability to declare the dividend to each of
the depositor and, therefore, the payment will be required to be
made immediately after making provision for expenses, to the
respondent Corporation.
The
net effect of the argument is that such repayment to be made to the
Corporation would stand in priority over all the claims of all the
creditors irrespective of the fact that whether they are secured or
unsecured. Such contention is ill-founded inasmuch as the
legislature has not used either under the Act or under the
Regulation the language or words ‘priority over any other debt’.
Further, the liability to pay would accrue only when the dividend is
to be declared to each depositor. Therefore, at a stage when the
Liquidator reaches for making payment to the depositors of the Bank,
the Corporation would be required to be paid first, since the
minimum amount of such dividend is mentioned as not less than a
paisa in the rupee. To say in other words, if the dividend is to be
declared of even one per cent to the depositors of the Bank, the
liability for repayment would be required to be discharged by the
Liquidator to the Corporation. Hence, it is only at a stage when
the dividend is to be declared to the depositor, the liability would
accrue upon the Liquidator to make payment and consequently the
right would accrue for getting repayment of the amount by the
Corporation from the Liquidator in the liquidator proceedings.
The
learned Counsel for the petitioner contended that if the priority is
not considered of the Corporation above all the debts, the
Corporation will have no fund to spare for discharge its obligation
under the Act to the other deposit holders of other insured Bank.
He also contended that when the Parliament has used the non-obstacle
clause, provisions of the Act and Regulation be interpreted in a
manner, which serves the purpose of the Act and there will be a
purposive interpretation of the Court. In the submission of the
learned Counsel for the petitioner, the purpose would be achieved
only if the priority is read over all other debts of the Bank.
The
examination of the aforesaid contention shows that the attempt on
the part of the learned Counsel for the petitioner is to add the
word of ‘priority’, which is not expressly inserted or provided by
the Parliament. If the Parliament wanted to give priority to the
debt of the Corporation over all other creditors, the language of
Section 21 or Regulation would have been by the use of word
‘priority’, which is lacking. The reference may be made to the
provisions of Section 529 and Section 529A of the Companies Act,
wherein the Parliament has expressly used the word ‘priority’, which
is lacking in DICGC Act. Therefore, if such contention of the
learned Counsel for the petitioner is accepted, it would result into
re-writing Section 21 of DICGC Act or adding the word into the
provisions of Section of DICGC Act, which is not permissible,
therefore, the said contention cannot be accepted. The purpose of
the Act as sought to be canvassed by the learned Counsel for the
petitioner is not for making the fund available to the Corporation
for discharge its obligation under the Act, but the Scheme of the
Act is to provide insurance to the deposits in any Bank up to a
particular limit and to indemnify the same. After the
indemnification of the liability, the Corporation may at the most
would be entitled to get dues by transposition in place of the
depositor or alternatively it would be entitled to claim the amount
as unsecured creditor from the bank in liquidation proceedings. In
case of transposition, in place of the depositor, Corporation would
be entitled to get the amount proportionately with the other
remaining amount of the depositor and as unsecured creditor it would
be entitled to claim the amount after all payments are made to the
depositors. As against the same, by virtue of the provisions of
Section 21 of DICGC Act read with the Regulation 22, the claim of
the Corporation would be above the depositors if the fund is
available for dividend of 1 paisa in the rupee. It is only by
virtue of the said provisions of Section 21 read with Regulation 22,
amongst the depositors, the claim of the Corporation by way of
repayment of the amount, which is already paid to the depositors
would be required to be satisfied first and with that purpose, the
Parliament has used the language of non-obstacle clause over any
other liability for time being in force. Such non-obstacle clause
is used, because in normal circumstances in any insolvency
proceedings or in liquidation proceedings or winding up proceedings,
the claim of the Corporation may rank for proportionate payments
with the other depositors or may rank as unsecured creditor. With
an intention to over-ride such provisions of liquidation
proceedings, the Parliament has used the non-obstacle clause.
Therefore, it is not possible to agree with the contention of the
learned Counsel for the petitioner that if the priority over all old
debts is not read, the purpose would be frustrated or that the
purpose would not be achieved.
The
learned Counsel for the petitioner alternatively next contended that
the Corporation’s claim is required to be considered in priority
over the secured creditors. I am afraid such contention can be
accepted in absence of any language used by the Parliament for
creating charge over any property by the Bank at the time of
claiming repayment. Therefore, it is not possible to accept the
contention of the learned Counsel for the petitioner that the claim
of the petitioner Corporation should be treated as in priority over
the claim of secured creditors (other than crown/State as secured
creditor) i.e. other private or institutional secured debits.
It
was also alternatively next contended by the learned Counsel for the
petitioner that amongst the unsecured creditors, the claim of the
Corporation should be treated as in priority i.e. next to the
secured debts. In view of the aforesaid interpretation of Section
21 read with Regulation 22 read with provisions of Section 115A(5),
this Court has already held that the depositors amongst the
unsecured creditor will have priority over other unsecured debts of
private person or institution and amongst depositors, as observed
earlier, the claim for repayment of the petitioner Corporation is
required to be satisfied first and thereafter only the claim of the
depositors for declaration of the dividends to the depositors is to
be considered. Of course, so far as the claim of workers’ dues/dues
of the employees are concerned, it is already observed earlier that
they shall be considered for pari passu payment with the secured
debts.
Hence, no further observations deserve to be made in this regard.
It
was also contended by the learned Counsel appearing for the
petitioner that certain applicants, who have claimed the status as
that of the secured creditor are not the secured creditor, since the
charge has not been created after obtaining permissions of the
Reserve Bank of India as per the mandatory requirement of Section
14A of the BR Act, which is applicable to the Corporative Bank.
There is considerable force in the submission of the learned Counsel
for the petitioner. However, it appears that whether permission of
Reserve Bank of India was taken or not is the question of fact,
which is not required to be gone into by this Court in the present
proceedings. Further, whether the other Banks who have claimed the
status as that of the secured creditors or not will have to be
decided by the Liquidator on the basis of the record available as to
whether the permission of RBI was taken under Section 14 of BR Act
or not and as to whether any competent forum has declared such Banks
or other financial institutions as secured creditors or not.
Therefore, no concluding observations deserve to be made on the said
aspect, except observing that it is only when the status as that of
the secured creditor is proved or found proved, the claim may be
considered, failing which such claim would fall in the category of
unsecured creditor. Of course, even if the status of secured
creditor is found proved, then also it will be to the extent of debt
or the security available, whichever is less. For the remaining
amount after exhausting security, the claim would stand as unsecured
debt.
If
the facts of the present case are examined in light of the
observations made hereinabove, it appears that the Liquidator, while
fixing the priority has not at all taken into consideration the
aforesaid aspects and he has been guided by the Government Circular,
which was quashed by this Court in the earlier proceedings. Even if
it is considered that the Liquidator had exercised the power
independently, then also the same cannot be sustained in view of the
reasons recorded hereinabove on the aspects of priority as required
to be taken into consideration by the Liquidator.
In
view of the aforesaid, the impugned decision of the Liquidator is
quashed and set aside in the respective petitions for fixation of
the priority and the Liquidator is directed to decide the question
of priority in light of the observations made by this Court in the
present judgement and to take further steps for disbursement of the
payment in accordance with law, preferably within a period of four
weeks from the date of receipt of the order of this Court.
The
petitions are partly allowed to the aforesaid extent. Rule made
absolute accordingly. No order as to costs.
26.2.2010 (Jayant
Patel, J.)
vinod
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