1 wp1657-11.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1657 OF 2011 M/s.Vilas Transport Co., a partnership ) firm having place of business at 309 ) Navratan Building, 69, P. D'Mello Road ) Mumbai 400 009 ) .. Petitioners Versus 1] Sangli Sahakari Bank Limited ) a Cooperative Bank, registered ) under the provisions of the ) Maharashtra Cooperative ) Societies Act, 1960, having ) office at 151, Sangli Sahakar ) Bhavan, S.K.Bole Marg, Dadar ) Mumbai 400 028 ) 2] Mr.M.B.Shinde, Special Recovery ) Officer and Sales Officer, Sangli ) Sahakari Bank Limited having ) his office at 151, Sangli Sahakar ) Bhavan, S.K.Bole Marg, Dadar ) Mumbai 400 028 ) 3] The Divisional Joint Registrar, ) Cooperative Societies, Konkan ) Division, Konkan, Navi Mumbai ) having office at Konkan Bhavan ) 3rd floor, CBD-Belapur, Navi ) Mumbai 400614 ) .. Respondents Mr.Sanjay Jain with Ms.Sapna Raichure, T.N.Tripathi for petitioners Mr.Aspi Chinoy, Senior Advocate with Mr.H.Toor, S.Pawar i/b. S. Bane for respondent Nos. 1 and 2 Mr.Niranjan Pandit, AGP for respondent No.3 2 wp1657-11.doc CORAM : S.C.DHARMADHIKARI, J. 4th October 2011. ORAL ORDER:- 1] By this petition under Article 226 of the Constitution of India, the petitioners challenge orders dated 25th June 2010 and 7th June 2011 Annexures N and S to the petition, which orders have been made on an application bearing No.2 of 2010. 2] The petitioners are a partnership firm carrying on business as Transporters and Carriers. The first respondent is a cooperative bank registered under the Maharashtra Cooperative Societies Act, 1960 whereas the second and third respondents are the Special Recovery Officer and Sales Officer, so also the Divisional Joint Registrar, Cooperative Societies who have passed the orders impugned in this petition. 3] It is the case of the petitioners that they have filed an application bearing No.2 of 2010 for marking the Recovery Certificate Nos.101/Sangli/1588 of 2002 and No.101/Sangli/1589 3 wp1657-11.doc of 2002 both dated 13th September 2002 as satisfied and for refund of excess amount to the extent of Rs.2,80,16,156/-. 4] It is the case of the petitioners before this Court that this application was made because the first respondent bank had granted certain credit facilities to the petitioners. The facilities are referred to and then, it is stated that since the amounts thereunder were not repaid, the first respondent bank applied for issuance of recovery certificate under section 101 of the MCS Act. On their application, on 13th September 2002, the Assistant Registrar concerned, granted recovery certificates, details of which are mentioned in the application which are in the sum of Rs.2,68,59,734/- and Rs.2,25,01,782/- with interest. 5] It is the case of the applicants/ petitioners that they made payments to the credit of its recovery certificates about which there is no denial. It is then stated that in execution of this recovery certificate, the first respondent sold commercial premises at Pohi near Jawaharlal Nehru Port Trust, admeasuring about 10.24 Acres. Alleging that the property has been sold for 4 wp1657-11.doc undervalue and referring to the proclamation of sale dated 19th September 2007, it is alleged that the sale proceeds have been misappropriated, diverted/ adjusted towards dues of other certified debtors. On the sale of this property itself, both the recovery certificates stand fully satisfied in the month of October 2007 and the balance sum of Rs.7,43,28,425/- need to be refunded to the applicants. 6] Without prejudice to the same, an allegation is made that there is another property near JNPT admeasuring 10.50 acres situate at Veshvi. Even that was sold for meager consideration. The allegations of the like nature have been made with regard to the property at Village Dighode, Navi Mumbai. There also it is stated that when the property was sold for Rs.52 lakhs, credit was given only for the sum of Rs.26,01,000/- and the balance is diverted for recovery of some other certificate. 7] Similar are the allegations with regard to the property at Pirkon, Koproli, Near Maha-Mumbai SEZ. Even that property is stated to be sold at under value but besides that its proceeds are 5 wp1657-11.doc not accounted towards the recovery certificates in question. In other words, the proceeds ought to have been appropriated and adjusted for payment under the subject recovery certificates. There is a reference to the sale of office premises situate at 114/B, Bharat Chambers, Baroda Street, Mumbai and there as well the allegations are more or less identical. Similar is the position with regard to sale of two flats at Palm Acres Coop. Housing Society, Mulund (East), Mumbai. It is stated that if the sale proceeds that have been received from sale of all these properties had been properly and duly adjusted and appropriated for recovery of the amounts due under the subject recovery certificates, then, both certificates are satisfied. The allegations in para 4 to 6 of this application read thus: “4. The applicants submit that under the said Recovery certificate, the respondent bank cannot claim interest in excess to the rate prescribed by the RBI from time to time. From year 2002 till date, such rate prescribed by the RBI for the Overdraft facility has been between 10.75% per annum to 12.75% per annum. The Bank cannot charge interest in excess to the rate 6 wp1657-11.doc prescribed by the RBI from time to time and contrary to the said Recovery Certificates. Under the said Recovery Certificates the future interest is to be charged on the principal amounts stated therein at the rate prescribed by the Reserve Bank of India from time to time. The respondent Bank is claiming future interest on Rs.2,68,59,734/- which is contrary to the Recovery Certificates. Recovery Certificate No.1588 of 2002 clearly stipulate that the future interest is to be charged on Rs.1,81,88,631.64 at the rate prescribed by the RBI. “5. The applicants submit that as on 9th December 2009, Rs.4,96,23,359/- (comprising of Rs. 2,68,59,734/- as principal and Rs.2,27,63,625/- as interest at the rate prescribed by the RBI from 1st January 2002 till 9th December, 2009) is due under Recovery Certificate No.1588 of 2002 and Rs. 4,15,72,042/- (comprising of Rs.2,25,01,782/- as principal and Rs.1,90,70,260/- as interest at the rate prescribed by the RBI from 1st January 2002 till 31st December, 2009) is due under Recovery Certificate No.1589 of 2002. As against total dues of Rs. 9,11,95,402/- the respondent No.1 has recovered Rs. 6,67,12,557/- by way of payments and from realisation of the properties leaving balance of Rs. 2,50,82,844/-. As against the said balance the respondent has not given credit of (i) Rs.25,99,000/- for Dighoda property, (ii) Rs.385 lacs for Pirkone Koproli property, (iii) Rs.50 lacs for office premises at Bharat Chambers, and (iv) Rs.70 lacs for flat No.4 at 7 wp1657-11.doc Mulund all aggregating to Rs.5,30,99,000/-. Thus, the applicants are entitled to and the respondent No.1 is liable to refund Rs.2,80,16,156/- as per particulars of claim supported by the certificates issued by the Chartered Accountant Raj Jain & Associates. The respondent Bank has also not given the credit of the balance payment of Rs.7,43,28,425/- for the Pohi property. The applicants are also entitled to the credit of Rs.70 lakhs received by the respondent Bank from the Guarantor Mr.E.D.Master.” “6. The applicants submit that besides above realisation, the respondent bank has attached and seized commercial property worth Rs.14 Crores at Pune. Despite that the respondent bank is illegally and wrongfully proceeding with the execution of the said Recovery certificate and insisting attachment and sale of various personal properties of the family of the partners of the applicants including the residential flat No.101, Sukhada CHS Limited, Worli, Mumbai. The applicants submit that the conducts of the respondents are illegally and wrongfully harassing the applicants despite the said Recovery Certificates are being fully satisfied. The applicants therefore submit that the said Recovery Certificates be remarked fully satisfied and the respondents be ordered and directed to refund Rs.2,80,16,156/- recovered by them as excess amount under the said Recovery Certificates together with interest at the rate prescribed by the RBI from the date hereof till actual refund. In the facts and circumstances, it is also just and proper and necessary that the further execution proceeding of the said Recovery Certificates of any nature whatsoever be stayed. Irreparable harm loss and injury which cannot be compensated in terms of money will be caused to the applicants, if the interim protection as prayed for are not granted; whereas no such harm or any prejudice will be caused to the respondents inasmuch as they have already recovered the entire 8 wp1657-11.doc certificate amounts and their claim is fully and adequately protected by attachment of various other properties including Pune commercial property worth Rs.14 Crores. Despite that the respondents are illegally and wrongfully proceeding to auction the personal residential premises of family members of the deceased partner of the said firm.” 8] On these allegations, the prayers are that the recovery proceedings be transferred to an independent and impartial Special Recovery Officer and pertinently that these recovery certificates be marked as fully satisfied in view of the various payments during execution proceedings as set out in para 5 reproduced above and that sums to the extent of Rs. 2,80,16,156/- as per the Annexure “O” to this application be refunded together with other sums as claimed in prayer (d) and prayer (e) states that further execution proceedings including the sale in respect of the flat at Worli be quashed and set aside. 9] On this application, when notices were issued, the respondent No.1 filed its reply and while raising several pleas with regard to its maintainability and it being barred by res judicata pointed out that there have been no adjustments or appropriation which could be said to be impermissible in law or in 9 wp1657-11.doc terms of the agreement reached between parties. There are common partners and Directors of the firms to which several facilities have been extended and against which recovery proceedings have been initiated and recovery certificates obtained. To their knowledge and wherever there has been a discussion and understanding, with the consent of parties, the sale has been effected. The sales have not been questioned. A detailed chart was annexed to the reply and all contentions were, therefore, specifically denied. 10] Thus, what the recovery officer had before him was this application which was made with its annexures and presented to him as stated on 28th January 2010 and the reply thereto of 6th March 2010. 11] He made an order thereon after hearing both sides and rejected the prayer for marking the recovery certificates satisfied. While considering the said application, he held that the application is nothing but an abuse of process of law and attempt to delay the execution proceedings. It is barred by principle of 10 wp1657-11.doc res judicata and the chart of recovery towards execution of the aforesaid certificates and the statement of account shows the credits given and he is satisfied with the details that there is no diversion or adjustments of any sale proceeds in other loan account or towards other recovery certificates. 12] It is this order which was challenged by the petitioners before the Divisional Joint Registrar, Cooperative Societies, Konkan division by filing Revision Application No.249 of 2010 and he upheld the same by going into various details. By his order dated 7th June 2011, he rejected this revision application and that is how this petition is filed. 13] Mr.Jain learned Counsel appearing for petitioners during his lengthy arguments took me through the record pertaining to the recovery certificates, their issuance, execution thereof, the sales conducted to recover the dues thereunder and the objections thereto. He also took me in details through the application parawise and by pointing out the transactions qua each of the properties which are subject matter of the 11 wp1657-11.doc application. He also tried to point out from the record that the adjustments that have been made are impermissible. It is categorically stated by him that the sale is not challenged. This is not an attempt to challenge the sale. It is also not an attempt to reopen the execution proceedings. This is a simplicitor application seeking to point out to the recovery officer that the proceeds that have been recovered from the sale of immovable properties should be accounted for, truthfully and properly towards the recovery certificates in question. The Recovery Officer was requested to go into all this because it was the allegation of the petitioners that the family manages several business. The family had obtained certain facilities from respondent No.1 bank. Certain members of the family were part of the management of the first respondent bank. To favour them and to set off their recoveries and close their accounts that the amounts received as sale proceeds from sale of petitioners' properties have been diverted and by such process monies have been utilised to wipe of other loan. He submits that these are malafide acts of the Recovery Officer and this is a clear case of collusion with the interested parties from the family and to favour 12 wp1657-11.doc them that this application has been rejected. There is no discussion in the order with regard to the correctness of adjustments and appropriation and, therefore, this Court in its writ jurisdiction should set aside these orders. Upon a pointed query from the Court as to under what provision of law, this application was made, all that Mr.Jain would argue is that the recovery is under a recovery certificate issued by the Assistant Registrar, C.S. Under section 101 of the Maharashtra Cooperative Societies Act, 1960. He invites my attention to section 101 thereof and submits that the certificate has to be executed in terms of section 156 of the Act. He submits that section 156 is titled as “Registrar's Powers to recover certain sums by attachment and sale of properties”. He invites my attention also to clauses of sub-section (1) of section 156 and particularly clause (e) thereof and submits that by introduction of this clause by Maharashtra Act 34 of 1963, what the enactment enables is to recover any amount due under a certificate granted under sub-section 1 or 2 of section 101 or sub-section 1 of section 137 together with section 156(1) and (2) with interest, if any, due on such amount or sum and the costs of process by the 13 wp1657-11.doc attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed. Inviting my attention to sub-section 2 of section 156, it is contended that the Registrar or the officer empowered by him shall be deemed, when exercising the powers under the foregoing sub-section or when passing any orders on any application made to him for such recovery, to be Civil court for the purposes of Article 136 to the Schedule to the Limitation Act, 1963. In the submission of Mr.Jain, therefore, the recovery officer acted as a civil court. He had the same powers as a civil court had while executing a money decree by attachment and sale of immovable and moveable properties. 14] Then coming to Rule 107 of the Maharashtra Cooperative Societies Rules 1961, Mr.Jain submits that the scheme of the Rules is very clear. The said rules fall under Chapter XII entitled “Miscellaneous”. It is setting out the procedure of attachment and once again Rule 107(1)(e) states that the Recovery Officer within whose jurisdiction the debtor resides or the property of the 14 wp1657-11.doc debtor is situated, then, upon the application of the society accompanied by a resolution of the committee of the society authorising any of the members to make and sign the application, recovery can be effected in terms of further sub- rules. Inviting my attention to each of these sub-rules, it is urged by Mr.Jain that the scheme is set out in the sub-rules. Therefore, section 156 and this rule together with sub-rules should be read harmoniously and together. If so read, it is apparent that by virtue of Rule 107 (22), the subject application to mark the certificate satisfied, could have been preferred and in any event that application is traceable to section 73 of Code of Civil Procedure, 1908, which is referred to in sub-rule (22) of Rule 107 of MCS Rules, 1961. For all these reasons according to him, there is no substance in the objection with regard to the maintainability of this application and it was squarely maintainable. 15] On the other hand, Mr.Toor appearing for first respondent Bank urged that the application was totally misconceived and not maintainable. It was an abuse of the process of law. After the 15 wp1657-11.doc sale was concluded way back in the year 2007, pursuant to which proclamation and sale certificates have been issued, amounts adjusted and when it was pointed out that the dues under the recovery certificates are still outstanding and recoverable, that the first respondent proceeded against the immovable property viz., a flat in Sukhada Coop. Society, Worli, Mumbai. That to, stall the sale thereof and further proceedings in execution, such an application is made. That application lacks bonafides completely. In these circumstances, it was not tenable and in any event has been rightly rejected. 16] After having heard learned Advocates at some length, in my opinion, it is not necessary to consider the prayers made in the application, the reliefs sought on that basis and whether the special recovery officer or the Divisional Joint Registrar were in error while passing the impugned orders and rejecting the request of the petitioner applicants' on merits. 17] In my view, the application itself was not maintainable and that was not the remedy of the petitioners at all. My reasons for 16 wp1657-11.doc this conclusion may now be set out. 18] While it is true that a recovery certificate can be executed in terms of section 156 of the MCS Act, section 156 itself is very clear and the same reads thus:- “156. Registrar's power to recover certain sums by attachment and sale of property:- (1) The Registrar or any officer subordinate to him and empowered by him in this behalf or an officer of such society as may be notified by the State Government, who is empowered by the Registrar in this behalf may, subject to such rules as may be made by the State Government, but without prejudice, to any other mode of recovery provided by or under this Act, recover - (a) any amount due under decree or order of a Civil Court, obtained by a society; (b) any amount due under a decision or award or order of the Registrar, Cooperative Court or Liquidator or Cooperative Appellate Court; (c) any sum awarded by way of costs under this Act; (d) any sum ordered to be paid under this Act, as a contribution to the assets of the society; (e) any amount due under a certificate granted by the Registrar, under sub-section (1) or (2) of section 101 or under sub-section (1) of section 137; 17 wp1657-11.doc together with interest, if any, due on such amount or sum and the costs of process, according to the scales of fees laid down by the Registrar, from time to time, by the attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed. (2) The Registrar or the officer empowered by him shall be deemed, when exercising the powers under the foregoing sub-section, or when passing any orders on any application made to him for such recovery to be the Civil Court for the purposes of Article 136 in the Schedule to the Limitation Act, 1963.” 19] A perusal of the same would indicate that it is not as if the Registrar or the officer empowered by him can be said to be a civil court for the purpose of the recovery contemplated by section 156 in terms of the recovery certificates issued under section 101 of the MCS Act, 1960. It is for a limited purpose that the Act terms the said officer as a civil court. It is also clear from a perusal of sub-section 2 itself that the same is for Article 136 in the Schedule to the Limitation Act 1963 that he is termed as a civil court. It has also been the position in law that the Recovery Officer cannot be said to be possessing all powers which a 18 wp1657-11.doc executing court possess under order XXI of CPC or in terms of the substantive provisions of CPC. It has been always clarified by this Court as also by Hon'ble Supreme Court that such limited powers would not in any manner make a proceeding for recovery of money akin to a suit. It is held in the case 2007(3) Maharashtra Law Journal (Satguru Construction Co Pvt Ltd vs. Greater Bombay Co-operative Bank Ltd) after referring to the decision reported in 2002 (4) Bombay Cases Reporter (Vithal Yadav Mhase vs. Amdar Balasaheb Thorat Nagari Sahakari Path Sanstha Maryadit through its Administrator) as under:- “8. The provisions of law comprised under section 101(3) clearly provide that a certificate granted by the Registrar under sub-section (1)and (2) shall be final and a conclusive proof of the arrears stated to be due thereunder and the same shall be recoverable according to the law for the time being in force, for the recovery of land revenue. Further section 156(1)(e) specifically provides that the Registrar or any officer subordinate to him and empowered by him in this behalf or an officer of such society as may be notified by the State Government, who is empowered by the Registrar in this behalf may, subject to such rules as may be made by the State Government, but without prejudice, to any other mode of recovery provided by or under the said Act, recover any amount due under a certificate granted by the Registrar under sub- section (1) and (2) of section 101 or under section (1) 19 wp1657-11.doc of section 137, together with interest, any, due on such amount or sum and the costs of process according to the scales of fees laid down by the Registrar from time to time, by the attachment and sale or by sale without attachment of the property of the person against whom such decree, decision, award or order has been obtained or passed. Undisputedly, Rule 107 of the Maharashtra Cooperative Societies Rules, 1961 hereinafter called as “the said Rules” makes elaborate provisions of law for attachment and sale as well as all the other modes for executing a recovery certificate issued under section 101(1) or (2) of the said Act. It is true that section 156 specifies that the proceedings for recovery of any amount due under the recovery certificate shall be without prejudice to any other mode of recovery. However, the proviso thereto clarifies that the other mode spoken of refers to the mode provided by or under the said Act and not under any other Act or statute.” “9. The provisions of law comprised under section 156 of the said Act r/w Rule 107 of the said Rules therefore clearly provide that when any recovery certificate is issued under section 101 of the said Act, the execution or the actual recovery of the amount in terms of such certificate has to be in the manner prescribed under the rules framed by the State Government under the said Act and in fact the Government has framed rules in that regard, and not under any other provision, nor by the authority other than the one specified under the said Act and the said Rules. The provisions of Rule 107 of the said Rules clearly incorporate the detailed procedure for execution of such recovery certificate.” 20] Besides this a perusal of the powers that are conferred on 20 wp1657-11.doc a executing court by the CPC and on the Recovery officer under the rules need to be taken