Special Civil Application No. 7338 of 2010. Case: Issan Overseas Ltd & 5 Vs Abhyuday Co-operative Bank Ltd & 3. High Court of Gujarat (India)
| Case Number | Special Civil Application No. 7338 of 2010 |
| Counsel | For Appellant: Mr. Vishwas K. Shah, Adv. And For Respondents: Nanavati Associates, Mr. S.N. Soparkar, Sr. Advocate with Mr. Amar Bhatt, Mr. P.K. Jani, GP with Mr. Rasesh Rindani, AGP and Mr. Anshin H. Desai, Advs. |
| Judges | Bhaskar Bhattacharya and J.B. Pardiwala, JJ. |
| Issue | Constitution of India - Articles 12, 14, 226, 243, 32; Gujarat Co-operative Societies Act, 1961 - Sections 115A, 115A(1), 13(2), 13(4), 159, 163, 163(1), 163(2), 17, 17(1), 17(1)(a), 17(1)(b), 17(4), 17A, 2, 2(17), 2(19), 20, 3(g), 37; Reserve Bank of India Act, 1934 (2 of 1934) - Sections 22, 3, 39 |
| Judgement Date | September 26, 2012 |
| Court | High Court of Gujarat (India) |
Judgment:
J. B. Pardiwala, J.
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By way of this petition under Article 226 of the Constitution, the petitioner No. 1, a debtor and a defaulter of a Cooperative Bank, has prayed for an appropriate writ, order or direction to quash and set aside order dated 8.10.2008 passed by the Registrar, Cooperative Societies, Gujarat State, Gandhinagar in exercise of his powers conferred under section 115A(1) read with section 17 of the Gujarat Cooperative Societies Act, 1961, whereby resolution passed by the Manekchawk Cooperative Bank Limited, Ahmedabad in its Special General Meeting held on 11.8.2008 in respect of its merger with the respondent No. 1 bank came to be approved and I thereby, order of I merger of the Manekchawk Cooperative Bank Limited, Ahmedabad with the respondent No. 1 bank came to be passed subject to certain terms and conditions. The case made out by the petitioners in this petition may be summerised as under:
1.1 On 12.4.2001, the petitioner No. 1 was granted financial facilities by the Manekchawk Cooperative Bank Limited, a State Cooperative Bank registered under the Gujarat Cooperative Societies Act, 1961 (for short "Act, 1961) in the form of cash credit limit upto Rs. 1.50 crore.
1.2 As the petitioners defaulted in making the payment to the bank, the Manekchawk Bank instituted arbitration suit on 13.1.2003 against the petitioner before the learned Board of Nominees under the Act, 1961 for recovery of Rs. 1,77,04,503/- with interest at the rate of 20.75% per annum as per the contract between the parties.
1.3 On 23.6.2003, the learned Board of Nominees passed a decree in favour of the Manekchawk bank.
1.4 On 20.9.2003, the petitioners preferred Appeal No. 1270 of 2003 before the Cooperative Tribunal against the decree passed by the Board of Nominees.
1.5 It is the case of the petitioners that they have moved a pursis in the aforesaid appeal for withdrawal, but till this date, no orders have been passed and the appeal as on today is still pending on the file of the Cooperative Tribunal.
1.6 It is also the case of the petitioners that the restoration application No. 7 of 2009 was preferred before the Board of Nominees and the said application came to be rejected by the Board of Nominees on 23.2.2010 on the ground of pendency of appeal before the Cooperative Tribunal.
1.7 It is also the case of the petitioners that being aggrieved and dissatisfied with the order dated 23.6.2003 passed in Lavad Suit No. 182 of 2003 and order dated 23.3.2010 passed in the Restoration Application No. 7 of 2009 by the Board of Nominees, Appeal No. 110 of 2010 is pending before the Gujarat Cooperative Tribunal, Ahmedabad.
1.8 According to the petitioners, a circular dated 16.2.2005 came to be issued by the Registrar, Cooperative Societies, Government of Gujarat for merger/amalgamation of Weak/Unviable Urban Cooperative Banks with economically strong banks.
1.9 The Board of Directors of the Manekchawk Bank in its meeting dated 14.10.2006 approved the proposal for merger with other financially sound bank.
1.10 According to the petitioners, thereafter, the Manekchawk Bank Limited got merged with the Abhyoday Cooperative Bank Limited i.e. the respondent No. 1 and a Multi State Cooperative Bank registered under Multi State Cooperative Societies Act, 2002 (for short "Act, 2002") by virtue of order dated 8.10.2008 passed by the Registrar, Gujarat Cooperative Societies under section 115A(1) and section 17 of the Act, 1961.
1.11 It is the case of the petitioners that after the order of merger, the respondent No. 1 bank issued a notice dated 23.1.2009 to the petitioners under section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI") and called upon the petitioners to deposit a sum of Rs. 3,50,32,281/- due and payable as on 3.12.2008.
1.12 In response to the demand notice dated 23.1.2009 issued by the respondent No. 1 under SARFAESI, the petitioners preferred objections dated 4.2.2009, which came to be rejected vide order dated 14.2.2009.
1.13 It is also the case of the petitioners that thereafter, a letter dated 28.3.2009 was addressed to the respondent No. 1 redressing its grievance and demanding copies of few documents, more particularly, described in the said letter.
1.14 The respondent No. 1 bank thereafter, issued notice informing the petitioners that it proposed to take steps under section 13(4) of the SARFAESI. The petitioners thereafter, preferred Special Civil Application No. 3978 of 2009 challenging notice dated 23.1.2009 as well as notice dated 7.4.2009 issued by the respondent No. 1 bank. The aforesaid writ petition was adjudicated by the learned single Judge of this Court and vide order dated 24.4.2009, rejected the same having found no substance.
1.15 It is also the case of the petitioners that the respondent No. 1 thereafter, filed an application under section 14 of the SARFAESI before the learned Metropolitan Magistrate in April, 2010, which is still pending with the Chief Metropolitan Magistrate, Ahmedabad.
1.16 It is in the aforesaid factual background that the petitioners have thought fit to challenge the merger of the Manekchawk Bank from whom the petitioners had availed cash credit facilities with the respondent No. 1 bank, which is a Multi State Bank substantially on the ground that merger of a Cooperative Bank constituted under State mechanism with a Multi State Cooperative Bank is dehors and contrary to the statutory provisions and hence, null and void.
Case of the respondent No. 1- bank as made out in its Affidavit-in-reply.
2.1 Upon [merger of the Manekchawk Co-operative Bank with the respondent bank, the respondent bank having stepped into the shoes of the Manekchawk Bank, initiated recovery proceedings against the borrowers/defaulters of erstwhile the Manekchawk Bank. In the instant case, the respondent bank initiated recovery proceedings against the petitioner company under the provisions of 13(2) of the Securitization Act, to which the petitioner had filed objections. The said objections were replied by the respondent bank and since the petitioners failed to make payment of the outstanding dues, the respondent bank resorted to proceedings under Section 14 of the Securitization Act. It is at that stage, the petitioners filed the present petition challenging the order dated 8.10.2008 passed by Ld. Joint Registrar (Audit) Co-operative Societies, Gandhinagar, Gujarat sanctioning the merger of the Manekchawk Bank with the respondent bank.
2.2 Insofar as merger of the Manekchawk Bank with the respondent bank is concerned, it is submitted that since many small urban co-operative banks were facing financial difficulties owing to which they either became weak and/or unviable banks, the Reserve Bank of India (RBI) formulated guidelines for merger/amalgamation of such banks with other strong banks/entities. A copy of the said guidelines is produced by the respondent No. 1 along with his reply at Annexure-R/2 at pg. 151, wherein the opening clause of the guidelines reads as under: -
With a view to facilitating consolidation and emergence of strong entities and providing an avenue for non-disruptive exit of weak/unviable entities in the co-operative banking sector, it has been decided to frame guidelines to encourage merger/amalgamation in the sector.
2.3 Pursuant to such guidelines, the Registrar, Co-operative Societies, State of Gujarat also issued a circular dated 16.2.2005 concerning merger/amalgamation of weak/unviable urban co-operative bank(s) with economically strong banks.
2.4 The Manekchawk Bank was desirous of merging with the respondent bank, and accordingly, after complying with all legal procedure required for such merger, the Board of Directors of both the Banks passed necessary resolutions for such merger and a Memorandum of Understanding (MOU) dated 29.1.2008 came to be executed between the Manekchawk Bank and the respondent bank for merger of the former bank with the respondent bank, subject to obtaining appropriate permissions from respective authorities for such merger.
2.5 Thereafter, the Manekchawk Bank wrote to the State Level Task Force for Urban Co-operative Banks a Department of RBI vide letter dated 28.2.2008 to help and guide the bank for further action as may be required for smooth merger. Thereafter, the RBI, after examining the proposal of merger, granted its No Objection Certificate (NOC) on 15.5.2008. Pursuant to the said NOC, the Central Government, Deptt. of Agriculture and Co-operation also issued NOC subject to following the instructions/circulars of the RBI issued from time to time and compliance of provisions of concerned State Co-operative Societies Act.
2.6 The Manekchawk Cooperative Bank Ltd. had also published a "public notice" in two newspapers i.e. in Gujarati as well as English calling upon the members, the depositors, the creditors and any other person interested with the working of the bank to submit their objections, if any in writing regarding the Scheme of Merger. It is given to understand that the petitioners had not objected and/or opposed or had given any response in writing to such public notice. Therefore, it would not be open for the petitioners to oppose and/or object to the merger as he is estopped from doing so.
2.7 That consequent upon the NOCs issued by RBI and the Central Government, the Registrar, Cooperative Societies, Gujarat vide its order dated 8.10.2008 granted sanction to the merger of the Manekchawk Bank with the respondent bank. Since upon such order, the name/registration of the Manekchawk Bank was required to be deleted from the record of the District Registrar, Ahmedabad, the respondent bank vide communication dated 30.3.2009 wrote to the District Registrar (Co-operative Societies), Ahmedabad to delete the registration of the Manekchawk Bank, pursuant to which, such deletion was intimated by the office of the District Registrar by letter...
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