Dismissed

Subhash Chandra Joshi v. the State of Madhya Pradesh

Madhya Pradesh HC14 Dec 2016WP/3614/2015

Case brief

AI extract

What is this about?

Petitioners challenged the receipt of only Rs. 1 lakh each after a bank liquidation, arguing for pro-rata recovery of excess deposits. The court held that depositors are entitled only to the insured amount unless surplus funds remain after repaying the insurer.

What did the court decide?

Writ petition dismissed; directed that payments exceed Rs. 1 lakh only after reimbursing the Corporation from surplus liquidation funds on a pro-rata basis.

Subhash Chandra Joshi Vs the State of Madhya… — Banking and Recovery | Madhya Pradesh HC (2016)

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WP No. 3614 of 2015

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14/12/2016

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Shri S.S. Chouhan learned counsel for petitioners.

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Shri Sudhanshu Vyas learned counsel for respondents

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No.1.

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Shri B.A. Chitale learned counsel for respondent no.2. None for respondent no.3. Heard finally.

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This writ petition has been filed by petitioners seeking a direction to the respondents to pay the remaining amount to the petitioners.

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In brief the case of petitioners is that petitioner no. 1 had deposited the sum of Rs. 9,70,274/- and petitioner no. 2 had deposited the sum of Rs. 11,85,408/- and sum of Rs. 1,19,421/was also deposited in the name of Ms. Menal Joshi daughter of petitioners. Thus petitioners had deposited total sum of Rs. 30,63,360/- through various fixed deposit in respondent no. 3 cooperative bank.

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Respondent No. 3/bank had gone in liquidation and petitioners were paid a sum of Rs. 1 lakh each. The grievance of petitioners is that they had deposited the amount more than Rs. 1 lakh each therefore, they are entitled for the amount which was kept in respondent no.3/bank.

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Respondent no. 2 has filed reply taking the stand that petitioners have been paid statutorily fixed amount of Rs. 1 lakh each and respondent no. 2 has priority right to receive remaining amount which is to be realized by official liquidator of respondent no. 3 bank. Respondent no. 2 has placed reliance upon various provisions of Deposit Insurance and Credit

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Guarantee Corporation Act 1961 in support of the priority right.

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Having heard the learned counsel for parties and on perusal of the record, it is noticed that the issue raised in the present writ petition is squarely covered by the judgment of Supreme court in the matter of Deposit Insurance & Credit Guarantee Corporation Vs. Ragupathi Ragavan & others reported in (2015) 9 SCC 629. Supreme court after considering the scheme of Act of 1961 and specially examining the provisions contained in Sections 16 & 21 of the Act has held as under:-

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20. The object with which the Act has been enacted has been stated hereinabove in a nutshell. The object was to insure the depositors so that they may not have to stand in a queue before the Official Liquidator for every paisa deposited by them with the concerned bank. As on today, as per the provisions of Section 16(1) of the Act, a sum of Rs.1 lakh is being insured or guaranteed in respect of each depositor. So a depositor is safe and he has not to wash his hands off his deposit if the amount deposited by him is less than Rs.1 lakh. The Official Liquidator, as per the provisions of the Act, has to give details about the depositors and the amount deposited by them in a prescribed form within three months from the date on which the liquidation order is passed or from the day on which he takes charge, whichever is later and within two months from the date on which the details are submitted to the Corporation, the Corporation has to make payment to the above extent either to the depositors directly or to them through the Official Liquidator.

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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

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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 subsection (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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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.

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One has to look at sub-Section (2) of Section 21, which in unequivocal terms, directs the Official

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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.

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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.

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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.

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Even if one looks at the entire issue from different point of view, one would believe that all the depositors have by and large equal right. If the amount deposited is less than Rs.1 lakh, each depositor gets the amount in full, but if the deposit is exceeding Rs.1 lakh, then only the amount which is in excess of Rs.1 lakh may not be given to the depositor, unless the bank in liquidation is having sufficient funds which can be given to all on pro-rata basis after providing for expenditure in the liquidation proceedings and after repaying the amount to the Corporation as per the provisions of the Act. The Act in a way guarantees repayment of Rs.1 lakh to each depositor. The High Court or any other authority has no power to direct payment in excess of Rs.1 lakh by ignoring statutory provisions of the Act and the Regulations made thereunder.”

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Keeping in view the aforesaid legal position, the petitioners were entitled to receive the statutory sum of Rs. 1 lakh on the basis of the provisions of Act 1961. The said amount has already been paid to them. Hence in terms of the above judgment it is directed that after providing for the expenditure in liquidation proceedings and after repaying the amount to the respondent No. 2 corporation as per provisions

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of Act, if sufficient funds are left with OL of respondent no.3/bank then the same be given to others on pro-rata basis. Writ petition is disposed off accordingly.

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C.C. As per rules.

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(PRAKASH SHRIVASTAVA) Judge

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BDJ

Subhash Chandra Joshi v. the State of Madhya Pradesh

Case brief

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Subhash Chandra Joshi v. the State of Madhya Pradesh

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