*HON’BLE THE CHIEF JUSTICE SRI ANIL R. DAVE AND *HON’BLE SRI JUSTICE VILAS V. AFZULPURKAR + WRIT APPEAL No.848 of 2008 % Dated 06-08-2008 # D. Uma Maheswar Rao … Appellant And $ Deputy Registrar of Cooperative Societies/Divisional Cooperative Oﬃcer, Charminar Division, Hyderabad and others … Respondents ! Counsel for the appellant : Mr. D.V. Bhadram Counsel for respondent No.1: GP for Cooperation <GIST >HEAD NOTE: ? Cases referred: Nil. IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD SATURDAY, THE SIXTH DAY OF SEPTEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE THE CHIEF JUSTICE AND THE HON'BLE MR JUSTICE VILAS V. AFZULPURKAR Writ Appeal No. 848 of 2008 (Writ Appeal under Clause 15 of the Letters Patent against the Order dated 23/07/2008 in Writ Petition No.15680 of 2008 on the file of the High Court.) Between: D. Uma Maheswar Rao S/o. late D.Linga Murthy Hyderabad R/o. 31-C, MLA Colony, Road No.12, Banjara Hills, Hyderabad-34. ... APPELLANT AND 1) Deputy Registrar of Cooperative Societies / Divisional Cooperative Officer, Charminar Division, Hyderabad. 2) The Veerashaiva Cooperative Urban Bank Ltd., Hyderabad, Regd. No. TA 1429/97, (Since merged with Agrasen Coop Urban Bank Ltd.,) 16-2-701/6/9, Opp: Sri Krupa Market, Malakpet, Hyderabad - 500 036, A.P. 3) Agrasen Cooperative Urban Bank Ltd., R.No. TA 1439 H.No. 15-2-391/392/1, Siddiamber Bazar, Hyderabad 500 012, rep. by its Chairman. 4) Sri Mohd Anwarulla, Borrower of the 2nd respondent. 5) Sri M.A. Khaleemulla Shabbir Borrower of the 2nd respondent. 6) Sri. M. Ravindranath, S/o. Late Sri. M.Basappa, LR of Ex- Chairman of the 2nd respondent Bank 7) Sri M.Prakashnath S/o. Late Sri. M.Basappa LR of Ex Chairman of the 2nd respondent Bank. 8) Sri Venkateswarlu, Ex. Director of the 2nd Respondent Bank 9) Smt. Uma Baswa Raj W/o. Jajmi Baswa Raj, Ex-Director of the 2nd Respondent Bank 10) Sri. G.C.Basweshar, Ex-Director of the 2nd Respondent Bank 11) Dr. Ramesh Babu, Ex-Director of the 2nd Respondent Bank 12) Sri. G.Swayam Prakash, Ex-Director of the 2nd Respondent Bank 13) Sri C.Balakrishna, Ex-Director of the 2nd Respondent Bank 14) Sri Shandra Sekhar Konda S/o. Veerappa Konda, Ex- Director of the 2nd Respondent Bank 15) Smt. Meenakshi A Patil, Ex-Director of the 2nd Respondent Bank 16) Smt. Padmaja Patil, Ex-Director of the 2nd Respondent Bank 17) Sri. V.S.Murthy, Ex-C.E.O. of the 2nd Respondent Bank 18) Sri. Vijayarangam, Valuer of the 2nd Respondent Bank (4th to 18th respondent are all residents of Hyderabad). ...RESPONDENTS Counsel for the Appellant: MR.D.V.BHADRAM Counsel for Respondent No.1: GP FOR COOPERATION The Court made the following: Judgment: (Per Shri Anil R. Dave, Chief Justice) 1. Being aggrieved by the order dated 23.7.2008 passed by the learned Single Judge in Writ Petition No.15680 of 2008, this appeal has been filed by the original petitioner. 2. The appellant has been aggrieved by the order passed by the learned Single Judge whereby the prayer made in the petition with regard to quashing of an order dated 15.7.2008 passed in I.A.No.577 of 2008 in C.T.A.No.81 of 2008 has been rejected. 3. The facts giving rise to the present litigation, in a nutshell, are as under: An enquiry under Section 51 of the Andhra Pradesh Co- operative Societies Act, 1964 (for short, ‘the Act’) was ordered to be conducted by the Joint Registrar/District Cooperative Oﬃcer, Hyderabad into the aﬀairs of Veerashaiva Co-operative Urban Bank Limited, Hyderabad (for short, ‘the bank’) for ﬁxing the responsibility for high non-performing assets and for the weak ﬁnancial status of the bank, especially with reference to the irregularities pointed out by the Reserve Bank of India in its Inspection Report dated 31.1.2003. 4. On enquiry, it was found that the ﬁnancial position had become weak due to bad and defective loaning. On scrutiny of the valuation reports, the properties mortgaged to the bank in respect of loans given were found to be overvalued. Accordingly, a report was given by the Joint Registrar holding that the loans were given to two borrowers without ensuring proper security on the basis of recommendations made by some of the Ex-Directors of the bank. Moreover, without observing prudential norms prescribed by the Reserve Bank of India, the loans were given by the bank without proper assessment of the repayment capacity of the borrowers. All these had adversely aﬀected ﬁnancial condition of the bank. In the enquiry report, it was further observed that the said borrowers had become defaulters and even if the mortgaged properties were to be disposed of, the bank would not be in a position to recover the entire loan outstanding. 5. On the basis of the afore-stated report, surcharge order dated 30.4.2008 was passed by respondent No.1 under Section 60 (2) of the Act against the borrowers, legal representatives of Ex-Chairman, Ex-Directors of the bank, the Ex-Chief Executive Officer and the Valuer of the bank. 6. The appellant – petitioner is one of the Ex-Directors of the bank. In pursuance of the afore-stated order, he was directed to remit certain amount within 30 days from the date of the surcharge order. 7. Being aggrieved by the afore-stated surcharge order, the appellant herein had ﬁled an appeal under Section 76 of the Act before the Andhra Pradesh Cooperative Tribunal, Hyderabad. Along with the appeal, he had also ﬁled I.A.No.577 of 2008 for suspension of the order dated 30.4.2008. 8. During the pendency of the appeal, the appellate Tribunal passed an order dated 15.7.2008 suspending surcharge order dated 30.4.2008 on a condition that the appellant – petitioner furnishes security to the tune of 50% of the surcharge amount within one month from the date of the said order. 9. Being aggrieved by the afore-stated order, Writ Petition No.15680 of 2008 had been filed by the appellant. 10. The learned Single Judge dismissed the petition on the ground that the condition with regard to furnishing security to the tune of 50% of the surcharge amount was not unreasonable. 11. Being aggrieved by the afore-stated order passed by the learned Single Judge, the original petitioner has ﬁled this appeal. 12. Learned advocate Shri D.V. Bhadram appearing for the appellant has mainly submitted that looking to the facts of the case, the appellate Tribunal ought not to have imposed any condition with regard to furnishing security because there is no provision with regard to imposing such a condition under the provisions of Andhra Pradesh Cooperative Tribunal (Procedure) Rules, 1994 (for short, ‘the Rules’). According to him, Rules 11 and 12 of the Rules provide that such an order can be passed only when the surcharge order is passed in respect of misappropriation of amount or sanction of benami loan. He has, therefore, submitted that the learned Single Judge ought to have quashed the direction with regard to furnishing security to the tune of 50% of the surcharge amount. 13. It has been thereafter submitted by the learned advocate that the enquiry initiated against the appellant – original petitioner was in violation of the principles of natural justice and, therefore, no such condition with regard to furnishing security should have been imposed by the appellate Tribunal. According to him, without giving proper hearing to the appellant, the surcharge order was passed and, therefore, the same is bad in law. If the order of surcharge is bad in law and when an appeal against such an order was ﬁled, the appellant should not have been directed to furnish any security. 14. So as to substantiate the afore-stated submissions made by him, the learned advocate has relied upon the judgment delivered by this Court in Writ Petition No.12524 of 2001 dated 25.6.2001. 15. We have heard the learned advocate and have also gone through the relevant record. 16. In our opinion, the learned Single Judge was justiﬁed in rejecting the petition for the reason that imposition of a condition with regard to furnishing security to the tune of 50% of the amount of surcharge was not unreasonable. 17. In our opinion, the submission of the learned advocate that an order with regard to deposit of 50% of surcharge amount can be made only in cases of misappropriation and in cases of sanction of benami loans is not correct. Rule 11 of the Rules read as under: 11. Application for interim suspension order:-Where a party seeks the interim suspension of the impugned order, he shall ﬁle a separate application for the same. Every such application shall be supported by an aﬃdavit in respect of applications for stay or suspension of the impugned orders passed by the departmental authorities, specially relating to misappropriation of amounts and sanction of benami loans, no interim orders in the nature of stay or suspension for a speciﬁed period shall be issued unless the applicant produces a cash deposit of not less than 50% of the amount involved in the impugned order or furnishes security of equal value as directed by the Tribunal.” 18. Upon perusal of the said rule, it is very clear that in an appeal where the surcharge order is in relation to misappropriation of amounts or sanction of benami loans, no interim order can be passed without imposing a condition incorporated in the said rule. According to the language of Rule 11, it is obligatory on the part of the Tribunal to impose a condition with regard to deposit of not less than 50% of the amount involved in the impugned order or furnish security of equal value when matters pertain to misappropriation of amounts or sanction of benami loans. This would not mean that in other cases where an appeal is ﬁled, the appellate Tribunal cannot impose such a condition. 19. In our opinion, it is left to the discretion of the appellate Court/authority whether any condition should be imposed. Looking to the facts of the case, the appellate Court/authority would decide whether any condition should be imposed upon the appellant while granting interim relief. If the appellate Court/authority feels that no such condition is required to be imposed upon the appellant, it may not impose such a condition; but if there is any statutory provision, which constrains the appellate Court/authority to impose a condition while granting an interim relief, the appellate Court/authority is bound to impose such a condition while granting interim relief. 20. It is pertinent to note that in the afore-stated rule, there is no mandatory provision with regard to directing the appellant to furnish security or deposit cash in cases other than the cases where misappropriation of amounts or sanction of benami loans are concerned. It means that in all other cases, it is for the appellate Tribunal to use its discretion in the matter of grant of stay as to whether any condition should be imposed upon the appellant. The discretion is taken away only when the matter relates to misappropriation of amount or sanction of benami loans because, in such a case, condition as incorporated in the rule must be imposed upon the appellant by the appellate Tribunal. 21. Upon perusal of the order passed by the appellate Tribunal, we ﬁnd that after considering the facts of the case in a nutshell, it has observed in the order that: “Considering present set of circumstances, interim suspension of the surcharge proceedings in RC.No.2166-2003 UB/A dated 30.4.2008 is granted on petitioner furnishing security to 50% of the surcharge amount …” The language used by the appellate Tribunal clearly denotes that the interim direction with regard to furnishing security was not given because of the provisions of Rule 11, but the same was given looking to the facts and circumstances of the case. 22. In the present case, the amount of surcharge did not relate to misappropriation of amounts or sanction of benami loans and, therefore, it was not obligatory on the part of the appellate Tribunal to impose condition with regard to furnishing security or deposit cash. However, the appellate Tribunal has discretionary power, which can be exercised by imposing appropriate condition upon the appellant while suspending the order of respondent No.1. This power, however, has to be exercised fairly and equitably. Therefore, it has to be seen whether the appellate Tribunal has exercised its discretion in a fair and equitable manner by imposing a condition of deposit of 50% of surcharge amount while suspending the order of respondent No.1. 23. The appellant – original petitioner is one of the Ex- Directors of the bank under whose tenure loans were given to the borrowers, who became defaulters, and subsequently on veriﬁcation of the properties mortgaged with the bank it came to light that the properties mortgaged were overvalued and even if the mortgaged properties were sold, the amount realized from sale of mortgaged properties would not be equal to the borrowed amount. Respondent No.1 has, therefore, passed a surcharge order whereby the appellant – original petitioner has been held liable, along with others, for the loss suﬀered by the bank. In the appeal, the appellate Tribunal, pending adjudication of the ﬁnancial liability of the appellant – original petitioner, imposed the afore-stated condition while staying the order of the Tribunal. In our opinion, while suspending order dated 30.4.2008, the appellate Tribunal was justiﬁed in using its discretion by imposing the condition of furnishing security to the tune of 50% of the surcharge amount. 24. Section 76 of the Act pertains to appeals and Section 76 (6) pertains to discretion of the appellate Tribunal with regard to passing of an interim order. Section 76 (6) of the Act reads as under: “76. Appeal: … … … (6) The Tribunal may pass such interim orders pending the decision on the appeal as may deem fit. … … …” 25. The afore-stated provision clearly denotes that it is open to the appellate Tribunal to pass an appropriate interim order during the pendency of the appeal. The afore- stated substantive power of the appellate Tribunal to use its discretion cannot be restricted as submitted by the learned advocate for the appellants. In the instant case, the appellate Tribunal has passed an interim order, which, in our opinion, appears to be just and proper and the learned Single Judge has rightly rejected the petition when the said order was challenged in the petition. 26. Ordinarily, a court of appeal will not tend to interfere with the exercise of discretion by the court/tribunal below and substitute for it, its own discretion unless of course, it is found by the said Court that the original Court misdirected itself on any question of law or it failed to consider the relevant factors governing the exercise of discretion or its discretion is otherwise vitiated by reason of misconstruction of any statutory provision or on account of misreading of any evidence on record. Looking to the facts of the case, we do not ﬁnd any reason to come to a conclusion that the appellate Tribunal has violated any of the afore-stated factors while exercising its discretionary power. 27. The submissions made with regard to violation of the principles of natural justice while passing the surcharge order are not relevant at this stage because the appellant can very well argue before the appellate Tribunal that the order of surcharge was bad in law for the reason that it was violative of the principles of natural justice. At this stage, we need not go into the facts of the case as the appeal is yet to be decided by the appellate Tribunal. 28. With regard to the judgment cited by the learned advocate, it may be noted that the said judgment does not help the appellant for the reason that the surcharge amount determined in the said case did not relate to misappropriation of amounts or sanction of benami loans and, therefore, the learned Single Judge has observed that there was no obligation to deposit 50% of the amount as required under Rule 11 of the Rules. 29. Even in the instant case, the surcharge amount did not pertain to misappropriation of amounts or sanction of benami loans and, therefore, it was for the appellate Tribunal to decide whether any condition be imposed while suspending the impugned order. The condition has not been imposed because of the mandatory provision incorporated in Rule 11, but the said condition has been imposed only because the appellate Tribunal, after considering the facts of the case, thought it necessary to direct the appellant to furnish security to the tune of 50% of the surcharge amount. 30. For the afore-stated reasons, we do not ﬁnd any substance in the appeal and, therefore, the appeal is dismissed with no order as to costs. ANIL R. DAVE, CJ September , 2008. VILAS V. AFZULPURKAR, J. svs Note: L.R. copy be marked. (By order) svs ........REGISTRAR To 1. 2.2 CD copies Form-NIC-OGS/WA {TRK}