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SCA/4189/2004 9/ 9 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 4189 of 2004
With
SPECIAL
CIVIL APPLICATION No. 4190 of 2004
For
Approval and Signature:
HONOURABLE
MR.JUSTICE KS JHAVERI
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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 ?
=========================================================
GUJARAT
STATE FINANCIAL CORP. - Petitioner(s)
Versus
GUJARAT
INDUSTRIAL COOPERATIVE BANK LTD. & 4 - Respondent(s)
=========================================================
Appearance :
MR
RD DAVE for
Petitioner(s) : 1,
MR CN TRIVEDI for Respondent(s) : 1,
NOTICE
SERVED BY DS for Respondent(s) : 2 -
5.
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CORAM
:
HONOURABLE
MR.JUSTICE KS JHAVERI
Date
: 28/09/2010
ORAL
JUDGMENT
1. By
way of these petitions, the petitioner, Gujarat State Financial
Corporation (for short, “the Corporation”) seeks to
challenge the common judgment and order passed by the Gujarat State
Co-operative Tribunal, Ahmedabad (for short, “the Tribunal”)
in Misc. Application Nos.121/2004 & 122/2004 dated 24.02.2004,
whereby, the said applications have been dismissed and the judgment
and decree passed by the Board of Nominee at Ahmedabad in Summary
Lavad Suit No.1653/2001 dated 18.08.2003 & Summary Lavad Suit
No.1654/2004 dated 26.09.2003 came to be confirmed.
2. The
petitioner is a Financial Corporation governed by the provisions of
the State Financial Corporation Act, 1951 and is a State
Government owned Company. The petitioner-Corporation has been
incorporated for the purpose of giving financial assistance to new
entrepreneurs, who desire to set up their industry within the State
of Gujarat and with the object of encouraging the over all
development in the State by generating opportunities of employment
and to earn revenue.
3. Some
where in 1997 – 1998, one M/s. Parna Industries Ltd., which is
a sister concern of M/s. Prasidhi Tea Company Pvt. Ltd., respondent
no.3 herein, approached the petitioner-Corporation for the grant of
financial assistance. After scrutinizing the loan documents, the
petitioner-Corporation sanctioned the loan vide sanction letter dated
06.02.1998. In accordance with the terms & conditions of the
grant of loan, the Company had created equitable mortgage of the
immovable property belonging to respondent no.3 being Bungalow No.
43, situated in “Golden Tulip Co-operative Housing Society Ltd”
and having T.P. Scheme No.21, Vasna, Ahmedabad, in favour of the
petitioner-Corporation.
4. Earlier,
the said property was a part of a Society, named, “Hasunagar
Co-operative Housing Society Ltd.” On or around 10.05.1995, the
division of original society, namely, “Hasunagar Co-operative
Housing Society Ltd.” was effected by the District Registrar of
Co-operative Housing Societies, Ahmedabad and pursuant to the said
division, the Society was divided into six different Co-operative
Societies and one of them was named as “Golden Tulip
Co-operative Housing Society Ltd.”, of which the disputed
property is a part at present.
5. Upon
request of said M/s. Parna Industries Pvt. Ltd., the
petitioner-Corporation granted further financial assistance, by way
of Working Capital Term Loan of Rs.130.99 Lacs, after executing
necessary security documents, including extension of equitable
mortgage, for the purpose of covering up the financial assistance.
6. In
2001, respondent no.1 herein, the Gujarat Industrial Co-operative
Bank Ltd. (for short, “the Bank”) filed suits being Lavad
Suit Nos.1649/2001, 1653/2001 & 1654/2001 against respondent
nos.2 to 5 before the Board of Nominees for the alleged recovery of
its dues. When the petitioner-Corporation came to know about the
filing of the aforesaid suits, it filed an application under Order-1
Rule 10 of the Code of Civil Procedure for joining as a
party-defendant in the said proceedings, which was allowed.
7. After
hearing the respective parties and after considering the evidence on
record, the Board of Nominees decreed the suits in favour of
respondent no.1-Bank together with interest, by way of judgment and
decree passed in Summary Lavad Suit No.1653/2001 dated 18.08.2003 &
No.1654/2004 dated 26.09.2003 along with a direction that regarding
its claim of having first charge over the disputed property, the
petitioner-Corporation shall approach the competent authority
concerned.
8. Being
aggrieved by the aforesaid judgment and decrees, the
petitioner-Corporation preferred Misc. Applications Nos.121/2004 &
122/2004 before the Tribunal. After considering the records of the
case, the Tribunal dismissed both the applications, by way of common
order dated 24.02.2004. Hence, these petitions.
9. Mr.
R. D. Dave, learned counsel appearing on behalf of the
petitioner-Corporation, submitted that the Tribunal as well as the
Board of Nominee failed to appreciate the fact that the
petitioner-Corporation had first charge over the property in
question. He submitted that the claim of respondent no.1-Bank is void
ab initio and cannot be enforced since it is not registered by
respondent no.3 before the competent authority, as required u/s. 125
of the Companies Act, 1956.
9.1 Learned
counsel for the petitioner further submitted that the “Golden
Tulip Co-operative Housing Society Ltd.” came into existence
some where around 10.05.1995 pursuant to the division of the
erstwhile “Hasunagar Co-operative Housing Society Ltd.”
into six different Co-operative Societies. Therefore, the “Golden
Tulip Co-operative Housing Society Ltd.” had the authority to
issue Share Certificate in favour of respondent no.3 at the time of
allotment of the property. The respondent no.3 had only submitted the
allotment certificate issued by erstwhile “Hasunagar
Co-operative Housing Society Ltd.” so as to create equitable
mortgage. Neither the charge of respondent no.1-Bank was registered
before the competent authority nor the erstwhile Society had any
powers to issue any letter of authority after the date of its
division, i.e. 10.05.1995. Therefore, equitable mortgage was not
legally and validly created in favour of respondent no.1-Bank by
respondent no.3. Consequently, respondent no.1-Bank does not get any
right to recover the amount against the disputed property.
9.2 Learned
counsel for the petitioner further submitted that the Tribunal has
erred in recording the conclusion that mortgage was created in favour
of respondent no.1-Bank in the year 1997 and that subsequently, for
the same disputed property, mortgage was created in favour of the
petitioner-Corporation in the year 1998 since the mortgage in
question created in favour of respondent no.1 was not legal and
valid.
9.3 Learned
counsel for the petitioner has drawn attention of the Court to the
provision of Section 18 of The Gujarat Co-operative Societies Act,
1961 regarding cancellation of registration of amalgamated, divided
or converted societies. He has submitted that the loan which was
advanced by respondent no.1-Bank was on the basis of a Share
Certificate that was bogus as it was not having any valid and legal
title. He has contented that neither the Tribunal nor the Board of
Nominee have given their findings on the said issue. Hence, the
impugned orders, being illegal and perverse, deserve to be quashed
and set aside.
10. Mr.
C. N. Trivedi, learned counsel appearing on behalf of respondent
no.1-Bank, submitted that the mortgage deed in respect of the
disputed property was executed by and between respondent no.1-Bank
and respondent nos.2 to 5 herein on 18.09.1997, meaning thereby, that
respondent no.1-Bank had advanced the loan prior in point of time
than the petitioner-Corporation. Hence, respondent no.1-Bank has
first charge over the property in question. Learned counsel has,
therefore, submitted that looking to the evidence on record, this
Court may not exercise its discretionary powers in the present case.
11. Heard
learned counsel for the respective parties and perused the documents
on record. Along with the affidavit-in-reply filed on behalf of
respondent no.1-Bank, a copy of the Mortgage Deed dated 18.09.1997
executed by and between respondent no.1-Bank and the Director of
respondent no.3 has been produced. A plain reading of the said Deed
goes to show that the financial assistance was advanced by creating
equitable mortgage of the disputed property. It is a matter of record
that the disputed property was earlier situated in the Society,
named, “Hasunagar Co-operative Housing Society Ltd.”
which was divided into six different Societies on or around
10.05.1995. Pursuant to such division, the disputed property became a
part of the new Society, named, “Golden Tulip Co-operative
Housing Society Ltd”. In the Mortgage Deed dated 18.09.1997
itself, it has been specifically stated that the disputed property is
also known as “Golden Tulip Bungalow”. The
petitioner-Bank had sanctioned loan in the year 1998, viz. after loan
was granted by respondent no.1-Bank, by accepting equitable mortgage
of the disputed property. It is established from the records of the
case that respondent no.1-Bank had advanced loan in the year 1997,
whereas, the petitioner-Corporation had advanced loan in the year
1998, both by accepting mortgage of the disputed property. It is
clear from the records that respondent no.1-Bank had advanced loan
against the disputed property first in point of time as compared to
the petitioner-Corporation and therefore, undoubtedly, respondent
no.1-Bank shall have first charge over the disputed property.
12. The
petitioner-Corporation, who was joined as a party-defendant in the
proceedings before the Board of Nominee, has not confronted with the
Share Certificate that was issued subsequently. In fact, it appears
from the record that in the proceedings before the Board of Nominee,
the witness of respondent no.1-Bank was not cross-examined by the
other side though the opportunity was given. Moreover, no documentary
evidence was also produced by the petitioner-Corporation in support
of its case. Therefore, the Board of Nominees had closed the right of
cross-examination and production of documents of the
petitioner-Corporation. When the petitioner-Corporation has failed to
exercise its rights that were available to it before the Board of
Nominee in the Lavad proceedings, it cannot be permitted to raise the
same at this stage. The petitioner-Corporation ought to have availed
the opportunity of cross-examining the witness/s of respondent
no.1-Bank and ought to have produced documentary evidence in support
of its case at the relevant time. However, the said opportunity was
not availed by it.
13. It
ought to have been that before issuing the new Share Certificate, the
Share Certificate issued by the erstwhile Society ought to have been
taken back. The non-collection of the Share Certificate issued by the
erstwhile Society, gives an inclination to a Member of the
reconstituted Society, to avail a loan on the basis of the Share
Certificate issued by the reconstituted Society. The laxity on the
part of the Society has enabled a Member to commit fraud by
taking loan of huge amounts from two different financial institutions
/ bank by mortgaging the same property. The new Share Certificate was
to be issued against the deposit of the old Share Certificate, which
has not been done in the present case. Hence, in view of the
provision of Section 19 of The Gujarat Co-operative Societies Act,
the reliance placed upon the provision of Section 18 of the said Act
by learned counsel for the petitioner-Corporation will not be of any
help to the petitioner-Corporation.
14. Considering
the facts of the case and the evidence on record, the respondent
no.1-Bank has first charge over the disputed property. Both the Board
of Nominee as well as the Tribunal below have appreciated the
evidence on record in its proper perspective and are completely
justified in passing the impugned orders. I am in complete agreement
with the reasonings given in the impugned orders and hence, find no
reasons to interfere with the same.
15. For
the foregoing reasons, both the petitions are dismissed. Rule is
discharged. The disputed property has been auctioned pursuant to the
orders of this Court. The sale proceeds deposited with the
petitioner-Corporation with be paid to respondent no.1-Bank along
with the accrued interest within a period of four weeks from today.
With the above direction, the petitions stand disposed of.
[K.
S. JHAVERI, J.]
Pravin/*
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