SCA/6802/2001 1/5 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 6802 of 2001 For Approval and Signature: HONOURABLE MR.JUSTICE RAVI R.TRIPATHI ========================================= 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 ? ========================================= BOMBAY MERCANTILE CO-OPERATIVEBANK LTD. Versus LEAD PHARMACEUTICALS C/O ARIN PHARMACEUTICALS AND OTHERS ========================================= Appearance : MR BHARAT JANI for the Petitioner None for Respondent Nos.1 and 3 MR AJ SHASTRI for Respondent Nos.2 and 4 None for Respondent No.5 ========================================= CORAM : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI Date : 02/07/2008 ORAL JUDGMENT 1. The Bombay Mercantile Co-operative Bank Ltd. is before this Court being aggrieved by judgment and order dated 01.05.2001 passed by the Gujarat State Cooperative Tribunal in Appeal No.204 of 1996, whereby the Tribunal was pleased to confirm the judgment SCA/6802/2001 2/5 JUDGMENT and order passed by the learned Board of Nominees in Lavad Suit No.1096 of 1991 on 12.07.1996. 2. The facts of the case are that respondent No.1 – firm, of which respondent Nos.2 and 3 are the partners and respondent Nos.4 and 5 are the guarantors, availed of over draft facility, limit of which was fixed to be Rs.2 lacs, by application dated 12.02.1985. The respondents offered security in the form of hypothecation of stock-in-trade and the personal guarantees of respondent Nos.4 and 5. The application for credit facility submitted by respondent No.1 is at Annexure-A to the petition. 2.1 The petitioner bank sanctioned the over draft facility of Rs.2 lacs vide sanction letter dated 11.04.1985 stipulating the terms and conditions to be fulfilled for availing of the said credit facility. A copy of the sanction letter is at Annexure-B to the petition. 2.2 Respondent No.1 accepted the terms and conditions of the petitioner bank and gave a letter on 13.04.1985 in token of acceptance of the credit facility on the terms and conditions stipulated by the petitioner bank. 2.3 As after passage of time, respondent No.1 defaulted in making payment and excessed the limit of the over draft, the bank was constrained to file Lavad Suit No.1096 of 1991 for a sum of Rs.2,71,903/-. This suit was dismissed by the Board of Nominees on the ground that even though the bank is able to establish its dues, SCA/6802/2001 3/5 JUDGMENT it is not able to establish that at the time of the loan transaction, the respondents were the members of the bank and therefore, the dispute between the petitioner bank and the respondents cannot be entertained under Section 96 of the Cooperative Societies Act. 2.4 The matter was carried in appeal being Appeal No.204 of 1996 and the Tribunal also non-suited the bank by observing in paragraph No.6 as under:- “6. Under the circumstances above, it is now well established law that the learned Nominee can entertain the suit under Section 96 of the Act only if the dispute is between the member and the society and the member should be from the date of loan transaction......” 2.5 The Tribunal relied upon a decision of the Hon'ble the Apex Court reported in AIR 1999 SC 1666 to hold that additional evidence should not be permitted at appeal stage. The Tribunal approved the judgment and order of the Board of Nominees holding that the learned Nominee can entertain the suit only if the principal debtor is a member on the date of loan transaction. 3. Mr.Jani, learned advocate for the petitioner bank relied upon a decision of this Court in the matter of Textile Traders Co-op. Bank Ltd. Vs. P.K.Thakker Construction Pvt. Ltd., reported in 2004(1) G.L.H. 335, wherein this Court has held that:- “When the application for membership is given by the applicants alongwith other documents for loan, merely SCA/6802/2001 4/5 JUDGMENT because the administration procedure regarding the application for membership is not completed, it cannot be said that the loan documents executed by the defendants were not in their capacity as members of the society when the membership was ultimately granted after execution of the documents but before disbursement of the loans.” 3.1 This Court was pleased to held that:- “It is, therefore, obvious that making an application for membership by a prospective loanee would always precede the co-operative bank making a loan to such an applicant and, therefore, when the Board of Directors accepts the membership application and enrols the applicant as a member of the co-operative society doing banking business, it is possible to construe the resolution enrolling the member as relating back to the date on which the membership application was submitted by the prospective loanee.” 4. For the reasons recorded in the aforesaid judgment, this Court finds that the Board of Nominees and the Gujarat State Cooperative Tribunal have erred in holding that the suit is not maintainable at the instance of the petitioner bank. 5. In the result, the petition is allowed. Judgment and order of the Board of Nominees in Lavad Suit No.1096 of 1991 dated 12.07.1996, confirmed in Appeal No.204 of 1996 by the Gujarat State Cooperative Tribunal by judgment and order dated 01.05.2001 are quashed and set aside. The matter is remitted back SCA/6802/2001 5/5 JUDGMENT to the Board of Nominees for its consideration on merits. Rule is made absolute. No costs. 6. At this juncture, Mr.Jani, learned advocate for the petitioner bank, submitted that the transaction is of the year 1985 and the suit was filed in the year 1991 and therefore, it will be in the fitness of things and interest of justice will be served if the Board of Nominees is directed to take up the matter for hearing as expeditiously as possible. The request is found reasonable, the same is granted. Board of Nominees is directed to decide Lavad Suit No.1096 of 1991 in light of the observations made by this Court in the aforesaid judgment as expeditiously as possible and preferably within 3 months from the date of receipt of judgment and order of this Court. Direct service is permitted. (RAVI R.TRIPATHI, J.) *Shitole