GOA STATE COOPERATIVE BANK LTD. versus KRISHNA NATH A. (DEAD) THROUGH LRS. AND OTHERS

Citation: [2019] 10 S.C.R. 721 · Decided: 20-08-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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GOA STATE COOPERATIVE BANK LTD.
v.
KRISHNA NATH A. (DEAD) THROUGH LRS. AND OTHERS
(Civil Appeal No.10596 of 2010)
AUGUST 20, 2019
[ARUN MISHRA, S. ABDUL NAZEER AND
M. R. SHAH, JJ.]
Maharashtra Co-operative Societies Act, 1960: s. 109 –
Termination of liquidation proceedings – Expiry of the period fixed
for liquidation – Effect of, on the proceedings for recovery of dues
instituted/pending as against the members – Held: Concept of
restitution is a remedy against unjust enrichment or unjust benefit –
When there is stay of proceedings by court, no person can be made
to suffer for no fault on his part and a person who has liability but
for the interim stay, cannot be permitted to reap the advantages on
the basis of interim orders of the court – Thus, the members who
have obtained stay in appeal or on recovery proceedings or the
case is pending, cannot take advantage of the fact that the period
fixed for Liquidator under the Act is over – Once a report has been
submitted, the Registrar has to take action in terms of the report
and in such circumstances when the proceedings for recovery are
pending against the members and the Society has taken loan from
the banks for its member, the actual money has to go to the creditor-
bank – In such cases it would be appropriate for the Registrar to
send notice of the proceedings to Banks – On facts, bank itself is a
prime lender cum liquidator – Proceedings cannot come to the end
– Thus, it is open to the bank to continue with the recovery
proceedings and make recoveries from the defaulting members –
Merely on the liquidation of Society, or the factum that the period
fixed for liquidation is over, liability of the members for the loans
cannot be said to have been wiped off.
Allowing the appeal, the Court
HELD: 1.1 The termination of the winding up under section
109 of the Maharashtra Co–operative Societies Act, 1960, cannot
be strictly applied so as to defeat the very purpose of the
   [2019] 10 S.C.R. 721
721
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SUPREME COURT REPORTS
[2019] 10 S.C.R.
legislative intent of recovery of amount. The recovery of public
money from defaulting members is absolutely necessary failing
which huge financial loss would be caused to the appellant–bank.
The interim stay granted by the tribunal cannot come to the
prejudice of the bank. Thus, the provisions of section 109 have
to be construed in such a fashion so as to enable continuance of
the proceedings for recovery. As the interim order of the court
cannot work to the prejudice of any of the parties, the provision
of section 109 of the Act should be construed in a manner that it
is not used to interdict recovery from the defaulting members.
[Para 15, 16] [731-E-G]
1.2 It is apparent from the facts of the instant case that the
winding up of the Society has been ordered and liquidator has
been appointed as the Society has utterly failed to achieve its
avowed objectives in disbursement of loans to proper persons
and in its recovery. No doubt about it that the liquidation of the
Society has come to an end after a particular period of time as
fixed under section 109. However, on lapse of time as fixed under
sub–section (1) of section 109 of the Act, proceedings have to be
terminated by the Registrar on receipt of final report from the
liquidator as ordered under section 109(2). However, at the same
time, the Registrar has power to extend the period of 6 years
fixed under section 109(1), not exceeding one year at a time and
four years in the aggregate, and maximum for 10 years. In case
time is not extended, the winding up comes to an end on the
expiry of 6 years or at the end of the extended period. The total
period can be 10 years. The second proviso to section 109 makes
it clear that if the Registrar comes to a conclusion that the work
of liquidation could not be completed by the liquidator due to the
reasons beyond his control, he shall call upon the liquidator to
submit his report. After getting the report, if the Registrar is
satisfied that the realisation of assets, properties, sale of properties
still remains to be realised, he shall direct the liquidator to
complete the entire work and carry out the activities only for the
purposes of winding up and submit his report within such period
not exceeding one year reckoned from the date of receipt of the
report from the liquidator. [Para 17] [731-H; 732-A-D]
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1.3 Section 109 (2) of the Act contains a non-obstante clause
which empowers the Regist

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