The Goa State Cooperative Bank Ltd. vs Shri Krishna Nath A. (Dead) Through Lrs.

2. Goa, Daman and Diu Cooperative Fisheries Federation Limited (hereinafter referred to as ‘the Society’) was registered under the Act as it is applicable to Goa. The main objective of the Society was to promote fisheries and improve socio­economic condition of the fishermen by providing necessary financial assistance, in order to enable them to procure mechanized fishing boats/trawlers. During the period from 1974 to 1980, the Society advanced loans to its 2 members to the extent of Rs.316 lacs to purchase engines/hull, winches, nets, etc. by raising loan from the Goa State Cooperative Bank Limited.

4. On the basis of enquiry conducted under Section 83(1) of the Act and in view of the report dated 1.8.1980, the Registrar of Cooperative Societies, Goa passed an interim order on 23.8.1985 under Section 102(1)(a) of the Act for winding up of the Society. The Registrar of the Cooperative Societies confirmed the order, in exercise of power under Section 102(2), on 24.1.1986 and appointed Additional Collector of Goa as Liquidator, who continued till 9.12.1991. As liquidation proceedings were not completed, the Registrar on 10.12.1991 appointed Mr. B.N. Pathan, Assistant Registrar of the Cooperative Societies as Liquidator, who continued till 28.2.1992. Yet another Liquidator was appointed by the Registrar on 21.2.1992, who continued till 15.10.1995. The Registrar vide order dated 16.10.1995 appointed Goa State Cooperative Bank as Liquidator in order to ensure speedy recovery of loans from the members of the Society.

5. The Bank in the capacity of Liquidator filed 156 recovery cases against the defaulting members of the Society, to whom the loans were advanced. The amount of outstanding was reduced to Rs.56 lacs 3 towards principal and Rs.154 lacs towards interest. Out of 156 cases filed against the defaulting members, 99 appeals were preferred to the Cooperative Tribunal, which were pending adjudication. The recovery could not be completed in view of the pendency of the appeals, interim stay granted by courts etc.

6. In the year 2001, one of the defaulting members of the Society filed Writ Petition No.358 of 2001 in the High Court of Bombay at Goa, prayer was made to declare that the winding up proceedings with respect to the Society be deemed to have been terminated with retrospective effect from 24.1.1993 and for an order restraining respondents continuing with the winding up/liquidation proceedings in respect of the Society.

7. The High Court allowed the writ petition vide judgment and order dated 29.11.2006, which has resulted in heavy financial losses to the Bank as the cases pending before the Adjudicating Authority will come to standstill. The High Court vide impugned judgment and order dated 29.11.2006 held that as per Section 109 of the Act, the winding up proceedings have to be closed as soon as practicable within six years from the date the Liquidator takes control of all the property, unless the period is extended by the Registrar under Section

109. Under Section 109(1) of the Act, the Registrar cannot extend the period more than 1 year at a time and 4 years in the aggregate and after the expiry of three years from the date on which the Liquidator 4 took control, it will be deemed that liquidation proceedings have been terminated and therefore, there is no choice left with the Registrar, but to obtain a final report from the Liquidator. The High Court has directed the Registrar to examine the report submitted by the Bank and take appropriate steps according to law. The High Court has held that Registrar has to close the winding up proceedings as a period of 7 years has lapsed and there is no provision under the law to continue with the winding up proceedings. Therefore, the writ petition was allowed and it has been declared that the winding up proceedings in respect of the Society are deemed to have been terminated with retrospective effect from 24.1.1993. The Registrar and the Liquidator have been restrained from continuing with the winding up/liquidation proceedings in respect of the Society.

15. The Society and the liquidator had filed recovery cases against all the defaulting members of the society to whom loans were advanced. The bank in total advanced Rs.250 lakhs to the society and on taking charge by the Bank as liquidator of the said society, the bank had outstanding of Rs.241 lakhs as principal amount and Rs.233 lakhs towards interest. The arrears due to the efforts of the liquidator bank were reduced to Rs.37 lakhs towards principal and Rs.154 lakhs towards interest. It is pertinent to mention that the bank has further pointed out that out of the cases filed against the defaulting members, in 42 cases appeals had been filed before the Cooperative Tribunal wherein stay orders were granted. It is also pointed out that 80 cases were pending with the Zonal Recovery Offices, i.e., Assistant Registrar, Cooperative Society’s Sales and Recovery Officer under section 156 of the Act. Therefore, the termination of the winding up under section 109 of the Act, cannot be strictly applied so as to defeat the very purpose of the legislative intent of recovery of amount.

25. The decision of the High Court to the contrary, deserves to be and is hereby set aside. Though the Liquidator cannot continue once the proceedings are over. Notice in such cases should be issued by the Registrar to the creditors and to persons for whose benefit recovery is to be made, to continue the pending proceedings in the instrumentality of court/tribunals/recovery officers etc. We hold that appellant Bank can continue the pending proceedings. The appeal is allowed to the aforesaid extent.