Allowed

The Baroda Peoples Co. Operative Bank Ltd(in Liquidation) v. Recovery and Sale Officer( Appointed by State of Gujarat)

Gujarat HC20 Jul 2022SCA/16283/2018

Case brief

AI extract

What is this about?

This order quashed a Japti Notice issued to seize the registered office of a cooperative bank in liquidation. The Court held that DICGC holds absolute statutory priority to be repaid from bank assets before any other creditor can enforce claims. The secured creditor's claim remains pending adjudication before the Tribunal. The notice was set aside allowing the liquidator to follow the statutory re

What did the court decide?

The impugned Japti Notice dated 08.10.2018 was quashed and set aside. The petition was allowed. A stay on the order was denied.

The Baroda Peoples Co. Operative Bank Ltd(in… — Banking and Recovery | Gujarat HC (2022)

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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R/SPECIAL CIVIL APPLICATION NO. 16283 of 2018

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THE BARODA PEOPLES CO OPERATIVE BANK LTD(IN LIQUIDATION)

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Versus

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RECOVERY AND SALE OFFICER( APPOINTED BY STATE OF GUJARAT)

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================================================== Appearance:

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MR. VEDANT RAJGURU for MR AJ YAGNIK(1372) for the Petitioner(s) No. 1

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MS. NIDHI VYAS, AGP for the Respondent(s) No. 3 MR AMAR N BHATT(160) for the Respondent(s) No. 4 MR NILESH A PANDYA(549) for the Respondent(s) No. 1,2

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CORAM: HONOURABLE MS. JUSTICE VAIBHAVI D. NANAVATI

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Date : 20/07/2022

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ORAL ORDER

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Issue Rule returnable forthwith. Mr. Nilesh A. Pandya,

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learned counsel appearing for the respondent nos.1 and 2, Ms. Nidhi Vyas, learned Assistant Government Pleader appearing for the respondent No.3- State and Mr. Amar N. Bhatt, learned counsel appearing for the respondent no.4 waive service of notice.

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This writ-petition under Article 226 of the

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Page 1 of 25

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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Constitution of India is filed seeking the following reliefs:

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“A. Your Lordships be pleased to quash and set aside the impugned Japti Notice dated 08.10.2018 at Annexure-A holding the same to be illegal and unconstitutional;

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B. During the pendency and /or final disposal of this petition, Your Lordships be pleased to stay operation, execution and implementation of impugned Japti Notice dated 08.10.2018 at Annexure-A;

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C. To pass any other and further reliefs that may be deemed fit and proper in the interest of justice and equity.”

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The brief facts of the present case are as under:

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2.1. It is the case of the petitioner herein that the

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petitioner is a cooperative bank in liquidation w.e.f. 22.05.2004. After liquidation, the liquidator has recovered Rs.45 crores and Rs.29 crores are yet to be recovered from the borrowers and others. After the petitioner bank went in liquidation, the Deposit Insurance and Credit Guarantee Corporation (hereinafter referred to as ‘DICGC’ for short) of India provided to the petitioner bank with Rs.58 crores. The amount was accordingly disbursed to the depositors. It is stated that by judgment and order passed in Letters Patent

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Page 2 of 25

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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Appeal No. 1300 of 2010 followed by the judgment and order of the Supreme Court of India in the case of Deposit Insurance and Credit Guarantee Corporation vs. Ragupathi Ragavan and others reported in 2015 (9) SCC 629 , every insured bank under Liquidation to whom insured amount is disbursed by Deposit Insurance and Credit Guarantee Corporation (DICGC) of India has to first repay the amount so recovered as a part of liquidation to the corporation and thereafter secured and unsecured creditors are entitled to claim recovery of the amount outstanding to them from the proceeds of liquidation. It is stated that the petitioner has repaid Rs.35 crores to the DICGC and is yet to repay additional Rs.20 crores to the DICGC. It is further stated that the petitioner bank has to recover about Rs.29 crores from the borrowers. Rs.20 crores out of the same shall be paid to the DICGC with interest and thereafter the remaining amount shall be paid to the secured and unsecured as per the preference sheet prepared by the respondent- State of Gujarat for all the cooperative banks under liquidation in the State of Gujarat. As per the preference sheet, respondent no.2 bank being a secured creditor will

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Page 3 of 25

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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receive the amount due to it. However, the aforesaid will take some time, and therefore, the respondent nos. 1 and 2 will have to wait for its recovery dues. The respondent no.2Baroda Central Cooperative Bank Limited is the bank from whom the petitioner bank before liquidation was availing of cash-credit facility with a limit of Rs.8.5 crores. As against the same, by way of security and guarantee, the petitioner bank had deposited with the respondent no.2 bank a Fix Deposit of Rs.1.41 crores. It is stated contrary to the settled principle of law as referred above, the Board of Nominee in Lavad Suit No. 12 of 2012 filed by the respondent no.2 bank against the petitioner bank in liquidation, passed the award in favour of the respondent no.2, and thereafter in its execution, the order was passed directing the respondent no.2 bank to recover the amount due to the tune of Rs.1.63 crores with interest, out of depositors of the petitioner bank in liquidation with the respondent no.2 bank and other nationalized banks. It is stated that the respondent nos. 1 and 2 have recovered an amount of Rs.1.44 crore. As on 31.03.2014, the remaining amount due was about Rs.20 lakhs which could be more as on date.

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Page 4 of 25

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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2.2. It is further stated that the petitioner bank has challenged the order passed in Lavad Suit No. 12 of 2012 dated 29.02.2012 by preferring an Appeal being Appeal No. 76 of 2012 before the Cooperative Tribunal, which is pending consideration, wherein, no stay is granted against operation, implementation and execution of the decree passed by the Board of Nominees.

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2.3. It is further stated that the petitioner is constrained to approach this Court by challenging the ‘Japti Notice’ dated 08.10.2018 issued by the respondent no.1, Recovery and Sale Officer appointed by the respondent-State of Gujarat for effecting recovery for the respondent no.2- Baroda Central Cooperative Bank Limited under Section 159 (2) of the Gujarat Cooperative Societies Act, 1961. By the impugned Japti notice, the respondent nos. 1 and 2 seized the registered office of the petitioner (in liquidation) which is the only immovable property, from where the liquidation process is going-on, for the purpose of sale in order to appropriate remaining amount of award issued against the petitioner bank (in liquidation) in

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Page 5 of 25

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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Lavad Suit No. 12 of 2012 dated 29.12.2012 filed by the respondent no.2 bank can be recovered.

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Heard Mr. Vedant Rajguru, learned counsel for Mr.

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A.Y. Yagnik, learned counsel appearing for the petitioner, Mr. Nilesh A. Pandya, learned counsel appearing for the respondent nos.1 and 2, Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 and Ms. Nidhi Vyas, learned Assistant Government Pleader appearing for the respondent No.3-State.

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4.1. Mr. Vedant Rajguru, learned counsel appearing for the petitioner submitted that the petitioner is a cooperative bank in liquidation w.e.f. 22.05.2004. After the petitioner bank went in liquidation, the Deposit Insurance and Credit Guarantee Corporation (DICGCI) of India provided to the petitioner bank with Rs.58 crores, the said amount so disbursed was distributed to the depositors.

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4.2. Mr. Vedant Rajguru, learned counsel appearing for the petitioner submitted that, in view of the ratio as laid down by the Hon’ble Supreme Court reported in 2015(9) SCC 629 ,

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no movable or immovable property including cash and deposit can be seized and attached as a part of recovery of the outstanding amount before the DICGCI is repaid its entire amount. The amount so far recovered and the present impugned Japti Notice dated 08.10.2018 for effecting remaining recovery is illegal, as the same is in violation of the aforesaid ratio, as laid down by the Hon’ble Supreme Court as well as this Court as stated above.

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4.3. Mr. Vedant Rajguru, learned counsel appearing for

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the petitioner submitted that the provisions of Deposit Insurance and Credit Guarantee Corporation Act, 1961 and the provisions of the Gujarat Cooperative Societies Act,1961 and the Preference Sheet prepared by the respondent no.3 towards repayment of the outstanding amount, out of the proceeds of petitioner bank in liquidation is illegal.

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4.4. Mr. Vedant Rajguru, learned counsel appearing for the petitioner submitted that the impugned Japti Notice, if not quashed, the petitioner Bank in liquidation will not have any office from where it can operate and recover the remaining

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Page 7 of 25

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outstanding amount from the borrowers to the tune of Rs.29 crores (approximately).

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4.5. Mr. Vedant Rajguru, learned counsel appearing for the petitioner submitted that out of 1.63 crores, which is the amount due to the respondent no.2 bank from the petitioner bank in liquidation, illegal recovery of Rs.1.44 crores has already been effected and no further recovery be permitted to the respondent nos. 1 and 2.

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4.6. In view of above, Mr. Vedant Rajguru, learned counsel appearing for the petitioner submitted that the impugned Japti Notice dated 08.10.2018 be held to be illegal

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and the same may kindly be quashed and set aside.

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Heard Mr. Amar Bhatt, learned counsel appearing

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for the respondent no.4 – Deposit Insurance and Credit Guarantee Corporation of India (DICGCI).

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5.1. Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 submitted that, DICGC is a body corporate

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Page 8 of 25

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constituted under Section 3 of the DICGC Act, 1961 for the purpose of insurance of deposits and guarantee of credit facilities and for other matters connected therewith and incidental thereto. The DICGC has the twin objectives of providing insurance cover to deposits in registered banks and giving guarantee support to credit extended by the banks and other approved financial institutions to certain categories of small borrowers.

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5.2. Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 submitted that, as per Section 21 of the DICGC Act, 1961 and Regulation 22 of the DICGC General Regulations, 1961 obliges the liquidator of the Bank in liquidation to repay the amount paid by DICGC before making payment to any other creditors.

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5.3. Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 submitted that, after the liquidation of petitioner’s bank w.e.f. 22.05.2004, the DICGC has released an amount of Rs.58,40,48,603.53 to the liquidator of the petitioner no.1 bank towards insured depositors. The petitioner

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Page 9 of 25

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is yet to repay an amount of Rs.20,48,93,948.88 to the DICGCrespondent no.4. Accordingly, the respondent no.4 herein would have the priority over all other secured and unsecured / preferential creditors as per the statutory provisions of the DICGC Act, which has been confirmed by the Apex Court. The respondent no.4 herein is therefore required to be paid first before making payment to any other preferential creditor.

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5.4. Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 submitted that, the respondent no.4 has statutory right to recover the entire amount released by it from the bank in liquidation and till the entire amount released by the respondent no.4 is repaid to it, the liquidator of the bank in liquidation cannot pay dues to any creditor or cannot meet any of its other liabilities, out of the funds or assets of the bank under liquidation.

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5.5. Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 submitted that, present petition arises out of the execution proceedings undertaken by the respondent no.2, pursuant to the award passed by the Board of Nominees,

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Page 10 of 25

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C/SCA/16283/2018 ORDER DATED: 20/07/2022

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Anand in Lavad Case No. 12 of 2012 filed by the respondent no.2. The respondent nos. 1 and 2 are seeking to recover the balance awarded amount by sale of the properties of the petitioner. Mr. Bhatt, learned counsel submitted that in spite of above, the respondent no.4 has priority over the dues, if any, of the respondent no.2 from the petitioner.

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5.6. In response to the affidavit-in-reply filed by the

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respondent nos. 1 and 2, Mr. Amar Bhatt, learned counsel

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appearing for the respondent no.4 submitted that the respondent no.4 has a right to seek claim against the petitioner for recovery of their amounts and denied that the respondent bank has a first right. Mr. Bhatt, learned counsel submitted that since the petitioner has gone into liquidation and the liquidator is empowered to effect recovery in terms of the provisions of the Gujarat Cooperative Societies Act, 1961, in terms of Section 21(2) of the DICGC Act, 1961 r/w. Section 115A(5) of the Gujarat Act and the law as laid down by the Hon’ble Supreme Court in (2015) 9 SCC 629.

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5.7. Mr. Amar Bhatt, learned counsel appearing for the

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Page 11 of 25

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respondent no.4 further submitted that, the DICGC which has a first right of repayment out of the recovery undertaken by the liquidator, as against any creditor, secured or otherwise.

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5.8. Mr. Amar Bhatt, learned counsel appearing for the respondent no.4 submitted that, petitioner has rightly challenged the action of the respondent nos. 1 and 2, in view of the fact that once the claim is settled under the provisions of Section 17 of the DICGC Act, 1961, the amount is required to be repaid by the liquidated bank in accordance with Section 21(2) of the DICGC Act, 1961 r/w. Regulation 22 of the DICGC General Regulations Act, 1961 on priority to the DICGC from the amount of recovery made by the liquidator/ funds available with the liquidator after making the provisions and expenses.

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5.9. In view of above, it was submitted by Mr. Bhatt, learned counsel that it was obligatory on the part of the liquidator to make the repayment to the respondent no.4 on priority basis. The respondent no.2 is a general creditor of the liquidated bank and has no right to obstruct the right of the DICGC which is entitled to be repaid under the provisions of

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Page 12 of 25

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the DICGC Act.

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5.10. In view of above, Mr. Bhatt, learned counsel lastly submitted that the respondent no.4 herein supported the contentions as raised by the petitioner herein and stated that the petition may kindly be allowed

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Heard Mr. Nilesh Pandya, learned counsel appearing for the respondent nos. 1 and 2.

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6.1. Mr. Pandya, learned counsel relied upon the affidavit in reply filed by the respondents. Relevant paras of the said affidavit in reply reads thus:

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“4. I say that the finance is given by the respondent No.2 to the present petitioner and at that time they have assigned the pronotes in favour of the present respondent No.2 – Bank and, therefore, said pronotes is given against the security to the respondent No.2 – bank and, therefore, the respodnent No.2 – bank has first right over the present petitioner. Under the circumstances, the newly added party – DICG has no prior right, as per the provision the DICG has right after the petitioner bank gone into liquidation. However, the respondent No.2 ahs already lien before the liquidation of the present petitioner – bank.

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5.I say that when the pronotes is assigned to the

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Page 13 of 25

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respondent No.2 bank, the respondent No.2 automatically becomes the second creditor and, therefore, the respondent No.2 has right to recover the dues of the promotes first against the present petitioner.

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I say that even the respondent No.2 bank has filed the suit against the present petitioner and then after the decree is passed in favour of respondent No.2 – bank and therefore, as per the decree, the respondent No.2 – bank has first right over the property of the petitioner – bank. I say that the respondent No.2 – bank has already filed the suit before board of nominees (Co. op. Societies) Vadodara, Court being Lavad Suit No.12 of 2012 and the decree is passed in favour of the respondent No.2 – bank and subsequently, the Recovery Officer was also appointed by the State of Gujarat, who is authorized to recover the dues. Suit amount was Rs.1,63,60,333.97/- of which Rs.1,44,73,003/- was credited up to 06/03/2012, I say that at the time of attachment notice, the total outstanding dues of the respondent No.2 – bank was Rs.18,87,330.97/- + interest thereon. However, the said attachment notice was challenged by the present petitioner in the present petition and because of the order passed by this Hon’ble Court, the respondent Nos.1 and 2 are not in a position to recover the said amount and take the further proceedings as per the attachment notice.

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I say that even before attaching the property of the petitioner, the petitioner was duly informed two times by writing the letter and also informed that the petitioner may settle by one-time settlement scheme. However, the petitioner has not given any reply to the said notice.

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I say that even after the pronotes given in favour of respondent No.2 bank, the petitioner has already recoverd the substantial amount and inspite of that, they have not transferred the said amount to

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Page 14 of 25

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the respondent No.2 – bank and inspite of huge amount is recovered by the present petitioner – bank, such amount is not transferred or passed on to the respondent No.2 – bank and the petitioner is also not paying amount in the loan account also. I say that in these circumstances, the State Government has already appointed the respondent No.1 to recover the dues of the respondent No.2 – bank and, therefore, the respondent No.2 – bank has initiated the proceedings against the present petitioner. I say that the respondent No.2 – bank has already issued the notice to attach the property of the petitioner – bank situated in Survey No.B/3/1/66/A admeasuring 577-76-59 sq. mtrs. of which 112-91-82 sq. mtrs paiki 56-45-91 super builtup sq. mtrs of western side and 56-45-91 super builtup sq. mtrs of eastern side of basement floor, total admeasuring 112.91.82 sq. mtrs and 53-99-63 super builtup sq. mtrs of first floor plus 50-36-34 super builtup sq. mtrs basement of land and with regard to said property, the details are already given in the attachment notice which is produced on page-11 of the present petition, which is under challenge by the present petitioner. I crave leave to rely upon the same at the time of hearing of this petition. I say that in these circumstances, the petitioner has no right to challenge the attachment notice issued by respondent Nos.1 and 2 dated 08.10.2018 and the present petition may be dismissed with costs.

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I say that it appears that the claims granted by the DICGCI is after the petitioner – bank gone into liquidation. However, the respondent No.2 has lien over the property as well as the pronotes in favour of respondent No.2 – bank and, therefore, the respondent No.2 – bank has first right over the property, for which the attachment notice is issued by the respondent No.2 – bank and therefore, the DIGC has no lien, as all the amount is financed by respondent No.2 – bank before liquidation and for that also, the pronote is in favour of the respondent No.2- bank.”

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6.2. Relying on the aforesaid affidavit in reply, Mr. Pandya, learned counsel submitted that the respondent no. 2 bank filed Lavad Suit against the petitioner and the decree passed in favour of the respondent no.2 bank, therefore, as per the decree, the respondent no.2 bank has first right over the property of the bank. The said decree is passed in favour of the respondent no.2 bank and subsequently, the Recovery Officer was appointed by the State of Gujarat, who is the Recovery Officer authorized to recover the dues amounting to Rs.1,63,60,333.97/- out of which Rs.1,44,73,003/- was credited upto 06.03.2012. At the time of attachment notice, the total outstanding dues of the respondent no.2 – bank was Rs.18,87,330.97/- + interest. The said notice is the subject matter of challenge in the present petition, therefore, the respondent no.2 is not in a position to recover the said amount which is due.

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6.3. Mr. Pandya, learned counsel submitted that it

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appears that the claim granted by the DICGCI is after the petitioner’s bank went into liquidation, however, the

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respondent no.2 has lien over the property as well as the pronotes in favour of the respondent no.2, and therefore, the respondent no.2 bank has right / charge over the property, for which the attachment notice / impugned notice is issued by the respondent no.2-bank, and therefore, the DICGCI has no lien, as all amount has been financed by the respondent no.2 – bank before the petitioner bank went into liquidation and for that also, the pronote is in favour of the respondent no.2 – bank.

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6.4. In view of above submissions, Mr. Pandya, learned counsel submitted that the present petition be dismissed in limine.

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Heard the learned counsels appearing for the

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respective parties and perused the averments made in the petition, affidavit in reply, further affidavit filed by the respective parties and submissions advanced by the learned counsel appearing for the respective parties.

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The petitioner bank went into liquidation w.e.f.

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Page 17 of 25

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22.05.2004. The respondent no.2 is the bank, from whom the petitioner bank before liquidation was availing cash credit facility with the limit of Rs.8.50 crores. As against the same, by way of the security and guarantee, the petitioner bank deposited with the respondent no.2 a fixed deposit of Rs.1.41 crores. The DICGCI provided Rs.58 crores to the petitioner bank, the amount so disbursed was distributed to the depositors. The respondent no.2 bank filed Lavad Suit No. 12 of 2012 before the Board of Nominee. By an order dated 29.02.2012, the Suit came to be decreed in favour of the respondent no.2 bank. Pursuant to the said decree, the Recovery Officer came to be appointed by the State of Gujarat and the respondent no.2 is authorized to recover the dues of the bank, and therefore, the respondent nos. 1 and 2 initiated the execution proceedings against the petitioner bank for recovery of the dues as stated hereinabove. It appears that the petitioner bank has challenged the decree passed in Lavad Suit No. 12 of 2012 before the Tribunal as averred in the petition and the said appeal is pending adjudication before the Tribunal.

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The respondent no.2 issued a Japti Notice dated 29.09.2017 which is duly produced at page-55/A which came to be challenged by the petitioner by filing Revision Application No. 47 of 2017. The earlier Japti Notice was challenged under Section 155 of the Gujarat Cooperative Societies Act, 1961 by the petitioner before the respondent State of Gujarat and the same was disposed of partially, by allowing the Revision Application in favour of the petitioner against the respondent nos. 1 and 2 vide order dated 28.09.2018 directing the liquidator of the petitioner bank to decide the claims in accordance with the regulations of the Central Government. Subsequently, new Japti Notice dated 08.10.2018 came to be issued by the respondent nos. 1 and 2, which is the subject matter of the present petition.

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Undisputedly, the petitioner bank is in liquidation

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since 2004. The respondent no. 4 – DICGCI has provided to

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the petitioner bank Rs.58 crores for disbursement to the depositors and which has been duly disbursed to the depositors. Rs.20.00 crore is payable to the respondent no.4 –

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DICGCI with interest.

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11. It is apposite to refer to the following provisions:

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11.1. Section 21 of the DICGC Act reads thus:

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"Section 21 :

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(1) Where any amount has been paid under section 17 or section 18 or any provision therefor has been made under section 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.

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(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,

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(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;

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(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 section 18, such sum or sums as make up the amount paid or provided for by the Corporation in respect of that Deposit".

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11.2. Regulation 22 of the DICGC Rules reads thus:

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“Regulation 22:

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The amounts repayable to the Corporation under sub-section (2) of section 21 of the Act shall be paid from time to time by, -

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(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.

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(b) the insured bank or the transferee bank, as the case may be, as soon as the realisations and other amounts in its hands, after making provision for expenses payable by that time in respect of such realisations or other amounts 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".

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11.3. Section 115A(5) of the Gujarat Cooperative Societies

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Act, 1961 which reads as under:-

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"Section 115A(5).

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(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 that Act.

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Explanation : In this section:-

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(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)

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(b) the expression "transferee bank" in relation to an insured Co-operative bank means a co-operative bank.

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(i) with which such insured co-operative bank is amalgamated, or

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(ii) to which the assets and liabilities of such insured co-operative bank are transferred, or

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(iii) into which such insured co-operative bank is divided or converted under sub-section (1) of section 17.”

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11.4. The Hon'ble Apex Court in the case of DICGC V/s.

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Ragupathi Ragavan reported in (2015) 9 SCC 629 , has held as

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under, relevant paras reads thus:-

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“20. Thus, as per the above-referred Scheme, each depositor, including each original petitioner, must have received Rs.1 lakh from the Official Liquidator. Initially, upon the bank being ordered to be wound-up, the original petitioners and other depositors had a right to recover Rs.1 lakh or the amount deposited, whichever was less, from the Official Liquidator and the said amount must had been paid to them when the petitions were filed.

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According to the provisions of the Act, after payment to the above extent is made to each depositor, if any amount is available at the disposal of the Official Liquidator, which he might have recovered from the borrowers or from other sources, he has to pay the said amount to the extent to which the amount had been paid by the Corporation as per the provisions of Section 21 of the Act. Section 21 of the Act reads as under :-

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“21. (1) Where any amount has been paid under section 17 or section 18 or any provision therefor has been made under section 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.

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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, -

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(b) the insured bank or, as the case may be, the transferee bank, shall, within such time and in such

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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 section 18, such sum or sums as make up the amount paid or provided for by the Corporation in respect of that deposit.”

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It is pertinent to note that when the Corporation had paid to the depositors as per the insurance scheme under the Act, the Corporation gets a right under the aforestated Section 21 of the Act to get money from the Official Liquidator.

¶162

One has to look at sub-Section (2) of Section 21, which in unequivocal terms, directs the Official Liquidator to make the payment to the Corporation as it has been stated in the said sub-section, notwithstanding anything to the contrary contained in any other law for the time being in force. Thus, the Official Liquidator, as per clause 2(a) of Section 21 of the Act, has to repay the amount to the Corporation. The aforestated Section 21 not only makes it obligatory on the part of the Official Liquidator to repay the said amount to the Corporation, but it also clarifies that there shall not be any other preferential creditor who would be getting any amount from the Official Liquidator till the amount payable under Section 21 of the Act is paid to the Corporation.

¶163

In view of the aforestated clear legal position, in our opinion, the High Court was not right when it directed the Official Liquidator to determine the mode of payment by ignoring the aforestated statutory provision.”

¶164

In view of above provisions of law as referred

¶165

above and the ratio as laid down by the Hon’ble Apex Court in 2015 (9) SCC 629 (supra), this Court is of the view that the DICGC has statutory right to recover the entire amount released from the bank in liquidation.

¶166

Page 23 of 25

¶167

C/SCA/16283/2018 ORDER DATED: 20/07/2022

¶168

In view of this Court, the appeal being Appeal No. 76 of 2012 challenging the order passed by the Board of Nominees in Lavad Suit No. 12 of 2012 is pending adjudication, and therefore, in view of this Court, the claim of the respondent no.2 is still under consideration before the Tribunal and the same cannot be said to be crystallized.

¶169

It is, however, open for the respondent no.2 to lodge its claim before the Official Liquidator, and the same would be subject to the outcome of the proceedings that are pending before the Tribunal. In view of the settled legal position, the Official Liquidator shall decide the claim in accordance with the ratio as laid down by the Hon’ble Supreme Court in 2015 (9) SCC 629 (supra) as referred hereinabove and as per the preference sheet prepared by the respondent- State of Gujarat for all the banks in State of Gujarat, the respondent no.2 bank being a secured creditor will receive the amount due to it in accordance with law.

¶170

On the aforesaid ground alone, this Court is

¶171

Page 24 of 25

¶172

C/SCA/16283/2018 ORDER DATED: 20/07/2022

¶173

inclined to quash and set aside the impugned Japti Notice dated 08.10.2018 issued by the respondent nos. 1 and 2.

¶174

For the foregoing reasons, this Court is inclined to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India and thereby quashed and set aside the impugned Japti Notice dated 08.10.2018. The petition is required to be allowed and is hereby allowed.

¶175

Rule is made absolute. Direct service is permitted.

¶176

(VAIBHAVI D. NANAVATI,J)

¶177

Mr. Nilesh Pandya, learned counsel appearing for the respondent nos. 1 and 2, at this stage requested that, this order be stayed for a further period of four weeks, so that the respondent nos. 1 and 2 can approach before the Higher Forum. However, this Court is not inclined to accede to the request as prayed for by Mr. Nilesh Pandya, learned counsel appearing for the respondent nos. 1 and 2.

¶178

(VAIBHAVI D. NANAVATI,J)

¶179

Pradhyuman

¶180

Page 25 of 25

The Baroda Peoples Co. Operative Bank Ltd(in Liquidation) v. Recovery and Sale Officer( Appointed by State of Gujarat)

Case brief

What is this about?

What did the court decide?

The Baroda Peoples Co. Operative Bank Ltd(in Liquidation) v. Recovery and Sale Officer( Appointed by State of Gujarat)

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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