notice under Section 126 of Act, 1964 = filing of any suit is barred unless and until notice thereunder is given to the Registrar in respect of any act touching the constitution, management or the business of the Society. Admittedly, in the present case, no such notice is given to the Bank nor to the Registrar of Co-operative Societies.
HONBLE SRI JUSTICE SURESH KUMAR KAIT AND HONBLE SRI JUSTICE N. BALAYOGI
CCCA.No.320 of 2003
21-09-2017
Aryan Co-operative Urban Bank Ltd., Nallakunta, Rep. by its Liquidator & another...Appellants
A.P.Womens Co-operative Finance Corporation Ltd.,Ameerpet, Hyderabad, rep. by its Managing Director & others..Respondents
For Appellants:Sri Kishore Rai, Advocate.
For Respondent No.1 : Sri J.S.Raju, Standing Counsel for A.P.Womens Co-operative Finance Corporation Ltd.
<Gist:
>Head Note:
? CITATIONS:
1. 2000 (1) ALD 499
2. AIR 1981 AP 180
3. 2004 (1) ALD 878
HONBLE SRI JUSTICE SURESH KUMAR KAIT
AND
HONBLE SRI JUSTICE N. BALAYOGI
CITY CIVIL COURT APPEAL No.320 of 2003
JUDGMENT : (Per Honble Sri Justice Suresh Kumar Kait)
Vide the present appeal, the appellants have assailed the
order dated 11th February 2003, passed by the VII-Additional
Chief Judge, City Civil Court, Hyderabad, in O.S.No.246 of
1998, whereby, the aforesaid suit has been decreed for
Rs.1,95,30,891.55 ps., with interest @ 13.5% p.a. from the date
of the suit till the date of realization. The 1st respondent/plaintiff-
Corporation was directed to give credit to the tune of
Rs.1,65,76,205/- made by the 1st appellant-Bank during the
pendency of the suit on the respective dates of payments.
2. The 1st respondent-Corporation filed aforementioned suit
by stating that the A.P. Women Co-operative Finance
Corporation Ltd., Ameerpet, Hyderabad (hereinafter shall be
referred to as Corporation) was established in the year 1975 on
the eve of the International Women Year. The twin objectives of
International Women Year were; promotion of equality between
men and women and the active involvement of women in
National development. The Corporation had undertaken the
massive programme of employment oriented Agro industries,
Cottage and small scale industries by providing technical
assistance, financial assistance etc. The Corporation, in order to
raise funds, advanced loans, encouraged thrifts and invested
surplus funds by depositing in the 1st appellant-Bank (hereinafter
shall be referred to as the Bank), as under :
1. Rs.25,00,000/- (Rupees Twenty Five Lakhs)
invested on 5-7-1993 for 90 days @ 14% and
renewed for 90 days upto 27-3-1995 and further
one year upto 27-3-1996 at 13% and further
renewed upto date at the same rate.
2. Rs.24,00,000/- (Rupees Twenty Four Lakhs)
invested for one year at 13% upto 31-3-1995 and
renewed for a further period of one year upto
31-3-1996 at 13% and further renewed upto date
at the same rate.
3. Rs.14,00,000/- (Rupees Fourteen Lakhs only)
invested for one year upto 31-3-1995 and
renewed for a further period of one year upto 31-
3-1996 at 13% and further renewed upto date at
the same rate.
4. Rs.12,00,000/- (Rupees Twelve Lakhs only)
invested for one year upto 31-3-1995 and
renewed for a further period of one year upto 31-
3-1996 at 13% and further renewed upto date at
the same rate.
3. Before aforementioned deposits, the Administrative Officer
of the Bank addressed a letter dated 14.07.1994 to the
Corporation to mobilise deposits in their Bank and promised that
they will pay more interest than the other Nationalised Banks i.e.
@ 10.5% p.a. on the deposited amount. Basing on the above
noted letter, the Corporation was convicted and issued Cheques
bearing Nos.740890 and 740891, both dated 15.07.1994, for
Rs.50,00,000/- each, in the Bank, with an undertaking to deposit
the above said two amounts for a period of one year with interest
@ 10.5% p.a. It was agreed between the Bank and the
Corporation to pay interest quarterly. Accordingly, the
Corporation requested the Bank to send interest on earlier FDRs
as under :
F.D.R. & Date F.D.R. Amount Qly Int.payable
(Rs.) For the period
1. 6892 dt.31-3-1994 25,00,000/- 31-3-94 to 28-6-94
2. 6896 dt.31-3-1994 14,00,000/- -do-
3. 6895 dt.31-3-1994 12,00,000/- -do-
4. 6893 dt.31-3-1994 5,00,000/- -do-
5. 6894 dt.31-3-1994 24,00,000/- -do-
===============================================
However, the 3rd respondent/3rd defendant i.e. the Chief Executive
Officer of the Bank, instead of repaying the interest, by letter
dated 05.04.1995, requested to renew FDR Nos.6892 to 6896 for
a further period of one year. By letter dated 26.07.1995, the 3rd
respondent requested to renew FDR Nos.3311 and 3312 of
Rs.50,00,000/- each, carrying interest @ 10.5% p.a. The 3rd
respondent assured to pay interest quarterly @ 13.5% p.a. if the
FDRs are renewed and requested to send two FDRs fell due on
15.07.1995. Accordingly, the Corporation, by a letter dated
28.07.1995, agreed for the renewal for a further period of 180
days from 16.07.1995 and instructed to pay interest on the above
deposits with Bankers Cheque in the name of the Managing
Director of the Corporation and stated that the agreed interest
shall be @ 13.5% p.a. from the date of renewal. The Bank
acknowledged the receipt of the above said FDRs. The Bank had
issued two cheques vide Cheque No.291936 for an amount of
Rs.2,67,123.25 ps., and another Cheque No.291937 for an
amount of Rs.3,02,054.80 ps. The said cheques were
dishonoured due to non-availability of funds. However, the
Bank, by letter dated 14.09.1995, again sent the Bankers Cheque
for the said amounts, vide cheque No.975577.
4. Further case of the Corporation is that by letter dated
26.09.1995, made it clear that if quarterly interest is not paid
within two days, the entire deposited amount would be
withdrawn from the Bank. In the very same letter, the
Corporation made it clear that the Bank is due to pay a sum of
Rs.10,37,150.75 ps., towards interest on the total amount i.e.
Rs.1,80,00,000/-. The Chief Executive Officer of the Bank, by
letter dated 12.10.1995, paid Rs.5,50,630.05 by cheque
No.759587, dated 12.10.1995, drawn on Andhra Bank, adjusted
towards interest upto 30.09.1995. As the Bank was not paying
the interest quarterly as promised even after regular persuasion
and letters and telephonic calls and due to dishonouring of
cheques, the Corporation had decided to renew the deposits only
for 100 days instead of 180 days. The Bank had acknowledged
in the same letter dated 19.10.1995 that two FDRs worth
Rs.50,00,000/- each were received on 25.10.1995. The
Corporation, by letter dated 14.12.1995, made it further clear
that the deposit of 100 Lakhs only will be renewed only for a
period of 100 days instead of 180 days. The Corporation also
requested the 3rd respondent/the Chief Executive Officer of the
Bank to make payments along with accrued interest by means of
Bankers cheque. Inspite of the same, the 3rd respondent, by letter
dated 15.12.1995, requested to continue the deposits till
31.12.1995.
5. The further case of the Corporation is that the President of
the Bank had addressed a letter dated 03.01.1996, expressing
regrets over the non-materialisation of FDRs on 31.12.1995 due
to financial crisis. However, he assured that necessary
arrangements for payment of FDR Nos.3311 and 3312 along
with interest due as on that date will be made. By letter dated
29.01.1996, the Corporation requested the 3rd respondent to pay
the amount along with interest upto 31.12.1995. However, the
3rd respondent by letter dated 02.03.1996, again requested to
renew the FDRs for a further period of one year. The
Corporation, again by letter dated 14.03.1996, expressed its
regrets over non-payment of Rs.180 Lakhs along with interest.
The 3rd respondent, by letter dated 17.10.1996, made it clear that
they want to repay all the deposits particularly institutional
authorities and requested for extension of deposits and assured
for payment upto March 1997. In letter dated 13.06.1996, the
Corporation enclosed the Five FDRs worth Rs.80,00,000/- and
same was acknowledged by letter dated 13.06.1996. The 3rd
respondent, by letter dated 08.11.1996, along with the statement
of account of the Bank dated 11.02.1997, sent a letter and
statement of account and further requested for extension of time
of 10 months to pay atleast the interest.
6. The Bank, by letter dated 16.07.1997, enclosed a cheque
bearing No.1537475, dated 16.07.1997 for Rs.5,00,000/- drawn
on APCOB, Vidyanagar Branch towards repayment of FDR
No.13971 and assured further that he shall make upto date
payment by the end of October, 1997. The Bank, in the same
letter, mentioned that it shall pay every month certain amounts
towards principal and interest adjustments of above mentioned
FDRs. However, even after letter dated 16.07.1997, the
Corporation did not receive any amount, for which, a legal notice
was issued on 22.09.1997 and the same was received and duly
acknowledged on 23.09.1997. Thereafter, the Corporation issued
rectified legal notice dated 28.09.1997 and received
acknowledgement on 03.10.1997 from respondent No.3 vide
letter dated 11.02.1997 along with a detailed statement of
account of payment of interest on FDRs. Since the Corporation
did not receive the amount, it filed a suit with a prayer to pass a
decree in its favour and against the Bank for a sum of
Rs.1,95,30,891.55 ps., and grant interest as per the contract rate
from the date of suit till the date of realisation and costs.
7. The case of the Bank as per the written statement is that
they approached the Corporation in usual course of business for
deposits, out of surplus funds available with the Corporation.
Accordingly, the Corporation invested an amount of
Rs.25,00,000/- on 05.07.1993 for a period of 90 days and the
rate of interest @ 14% p.a. and the FDRs were renewed from
time to time and further renewed for one year from 27.03.1995 to
27.03.1996 with interest @ 13% p.a. The same was renewed
upto date and the interest payable on above FDRs till 26.03.1996
was already paid. As on 26.03.1998, the amount due was
Rs.31.50 Lakhs consisting of Rs.25 Lakhs principal amount and
Rs.6.50 Lakhs interest payable from 27.03.1996 to 26.03.1998.
The Bank was agreed to pay the above dues within reasonable
time. Originally, the deposit was made for a period of one year
for a sum of Rs.24 Lakhs vide FDR No.6894, dated 31.03.1994
and the same was renewed for one more year, and further
renewed till 31.03.1996 vide FDR No.13969. The interest
payable on the above FDR upto 31.03.1996 amounting to
Rs.6,24,854.80 was fully paid by the Bank. Apart from the
interest, a sum of Rs.4,00,000/- was paid towards partial
payment of principal in February, 1998. Hence, the intention of
defaulting on the part of the Bank does not arise. The amount
payable on the above FDRs till 31.03.1998 would be
Rs.26,17,731.50 ps., consisting of Rs.20,00,000/- towards
principal and Rs.6,17,731.50 ps., towards interest.
8. Further case of the appellants is that another deposit was
made by the Corporation vide FDR No.6896, dated 31.03.1994
for a sum of Rs.14 Lakhs for a period of one year and the same
was further renewed for one more year till 31.03.1996. The
appellant had paid full principal amount of Rs.14 Lakhs together
with interest of Rs.6,40,704/- payable till 31.03.1996. The
deposit of Rs.12 Lakhs was made by the Corporation on
31.03.1994 vide FDR No.6895, for one year. The principal
amount of Rs.12 Lakhs together with interest of Rs.4,55,178.10
ps., payable till 31.03.1995 was already paid by the Bank.
However, the cheques were dishonoured only on technical
grounds and not for want of funds. The Bank was operated by
the Committee Members as per the old bye-laws. The said bye-
laws were amended with effect from 05.12.1994 and
subsequently, the bank operations were entrusted to the
Managing Committee. Accordingly, the Bank submitted the
signatures of the officers of the concerned Bank for allowing
operation of accounts. Meanwhile, the Bank had issued cheques
in good faith, however, the concerned Bank i.e. Andhra Bank of
Vidyanagar Branch dishonoured the cheques and sought the
approval of Registrar for attestation of the new signatures. The
attestation process was delayed for want of clarification from the
head office i.e. Registrar of Co-operative Societies. These are the
circumstances under which the cheques issued in favour of the
Corporation were bounced and the said fact was communicated
to the Corporation.
9. Further case of the Bank is that inspite of their intention
for repaying the amount, the Corporation, in haste, filed the suit
instead of approaching the Arbitrator for settlement of dispute
under Section 61 of Act, 1964. However, in the interest of
business relations, the Bank considered to pay interest only on
the outstanding FDRs for further period from the last date with
the date of clearance of the FDRs and that the Bank was
prepared to pay the FDRs along with interest as stated below :
F.D.R. 3311 Rs.50 Lakhs
F.D.R. 3311 Rs.50 Lakhs
F.D.R. 3311 Rs.25 Lakhs
F.D.R. 3311 Rs.20 Lakhs (As Rs.4 Lakhs was
already
Paid against Rs.24 Lakhs)
-----------------
Rs.145 Lakhs
-----------------"
It is the further case of the Bank that if the Corporation is
agreeable to convert the above FDRs into lower denominations,
renewal of FDRs with lower denominations is proposed as
follows:
March, 1998 Rs.10 Lakhs.
April, 1998 Rs.10 Lakhs.
May, 1998 Rs.10 Lakhs.
June, 1998 Rs.10 Lakhs.
July, 1998 Rs.20 Lakhs.
August, 1998 Rs.20 Lakhs.
September, 1998 Rs.20 Lakhs.
October, 1998 Rs.20 Lakhs.
November, 1998 Rs.20 Lakhs.
December, 1998 Balance amount.
10. Further case of appellants is that the Bank had paid
Rs.44,99,901/- towards interest alone against various FDRs
apart from the payment of Rs.35 Lakhs towards principal
amount. The Bank denied in toto the alleged amount of
Rs.1,95,30,891.50 ps., as demanded by the Corporation, as the
suit amount was not covered under any specific contract between
the Bank and the Corporation. The Bank was agreeable, in the
absence of any specific contract, to pay the interest on matured
deposits as per the directives of RBI only. Therefore, the interest
during the tenure of suit or after the expiry of respective due
dates of FDRs, is denied.
11. Basing on the plaint allegations and after considering the
written statement of the Bank, the trial Court initially framed the
following issues :
1. Whether the plaintiff is entitled for recovery of the
suit amount
2. To what relief
12. After filing written statement by defendant No.4 i.e. Special
Category Deputy Registrar/Liquidator, Aryan Co-operative
Urban Bank Ltd., Nallakunta, Hyderabad, who was impleaded as
defendant No.4 as per order of the trial Court dated 08.12.2002
passed in I.A.No.295 of 2002, additional issues were framed on
11.12.2002 as under :
1. Whether the suit is barred U/Sec.121(2) of A.P.
Co-operative Act,. 1964
2. Whether the suit is maintainable for non-
compliance of Sec.126 of the A.P. Co-operative
Societies Act, 1964
3. Whether the suit is maintainable in view of the
Sec.61(1)(d) of A.P. Co-operative Act, 1964
13. It is pertinent to mention here that the main dispute
between the Bank and the Corporation is with regard to the
payment of interest due on matured Fixed Deposits made by the
Corporation with the Bank. So far as the transactions i.e. the
deposits and the rate of interest are concerned, the same are not
in dispute. The main contention of the Bank is that the suit was
not maintainable and a reference under Section 61(1)(d) of Act,
1964 should have been made; that no notice had been issued
under Section 126 of Act, 1964; and in view of the winding up of
the Bank, the Civil Courts jurisdiction is barred under Section
121(2) of Act, 1964.
14. However, the learned trial Court opined that the liability of
the Bank arises on account of fixed deposits made by the
Corporation under Term Deposit Receipts, which carry interest
specified thereon and as such the liability of the Bank arises
under a monetary transaction as a Banker and the said liability
had also been duly acknowledged under Exs.B-3 to B-19, B-21
and B-22. The said liability is only on Banker and the same is
not touching with the management or the business of the Bank so
as to attract the provisions under Section 61(1)(d) of Act, 1964.
This matter with regard to the issue was negated by the trial
Court and the revision preferred vide C.R.P.No.860 of 2002 was
dismissed by the High Court confirming the orders of the trial
Court. As such, the issue had become redundant and since it
does not touch the business or management, the suit filed by the
Corporation was maintainable.
15. With regard to issuance of notice under Section 126 of Act,
1964, the learned Court below opined that the same does not
arise at all since before filing of the suit, the Corporation
addressed various letters calling upon the Bank for payment of
outstanding amounts, to which, the Bank replied, requesting for
renewal, and thus, there being no specific form of notice
prescribed under Section 126 of Act, 1964 and the nature of
liability being one of a trustee as a Banker to repay the amounts
due as on the date, the said provision is not applicable and on the
other hand, duly complied with.
16. Insofar as bar of jurisdiction of civil Court under Section
121(2) of Act, 1964 is concerned, it is held by the trial Court that
only in respect of the Societies which are contemplating winding
up or being liquidated, and in the present suit, the said defence is
not available, since admittedly, by the date of filing of the suit, no
such proceedings were either contemplated or pending, but it was
only during pendency of suit, the liquidation proceedings were
started i.e. nearly three years after filing of the suit, and as such,
Section 121 (2) of Act, 1964 has no application.
17. Admittedly, the Bank repaid certain amounts towards the
discharge of their liability and the same are reflected in the
written arguments of the Corporation. Insofar as the balance
amount is concerned, it remains unpaid and in view of admission
on the part of the Bank offering a particular rate of interest, they
are bound to repay the same with agreed and undertaken interest.
18. We have heard learned counsel for the appellants and the
Corporation and perused the material on record.
19. As mentioned above, defendant No.4 i.e. the Special
Category Deputy Registrar/Liquidator of the Bank was
appointed in pursuance of the order of the Joint Registrar/DCO,
dated 05.09.2002, whereunder, the Joint Registrar passed orders
to liquidate the Bank. The copy of the order was filed before the
trial Court. In view of the same, the Corporation, without
seeking leave of the Registrar of Co-operative Societies, is not
entitled to sue the Bank, in view of Section 121(2) of Act, 1964,
which reads as under :
While a society is being wound up, no suit or other
legal proceeding relating to the business of such society
shall be proceeded with, or instituted against, the
liquidator as such or against the society or any member
thereof on any matter touching the affairs of the society
except by leave of the Registrar and subject to such
terms and conditions as he may impose :
Provided that where the order of winding up is
cancelled, the provisions of this sub-section shall cease
to apply in relation to the society and any member
thereof, but shall continue to apply to the person who
acted as liquidator.
20. As per the said provision, without seeking leave of the
Registrar of Co-operative Societies, the Corporation was not
entitled to sue the Bank. However, before going further, it is
pertinent to mention here that the business of the Bank, as stated
in the bye-laws, more particularly bye-law No.5(ii), is as under :
to accept the deposits or money from the public,
repayable on demand or otherwise, and withdrawable
by cheque, draft order as per Bye-laws No.41 which
reads as under :
(i) Deposits may be received at any time
within the limits determined under Co-
operative Societies Act and Rules on
such rates of interest and subject to
such rules regulations as may be fixed
by the Board of Directors and also
subject to the directives issued by the
Reserve Bank of India in this behalf
from time to time.
(ii) Deposits may be received on current,
savings, fixed, recurring, cumulative
and under any other special
scheme(s).
21. It is not in dispute that during the course of business, the
Bank had approached the Corporation to invest surplus funds
and the same is admitted by the Corporation in the plaint. As
such, the trial Court has no jurisdiction to try the suit under the
provisions of Section 61(1)(d) of Act, 1964. Accordingly, the
claim of the Corporation had to be sent to the Deposit Insurance
Credit Guarantee Corporation of the Reserve Bank of India for
settlement of claims upto Rs.1,00,000/- and any other claim made
to the Liquidator, the Liquidator has to settle such claim on pro-
rata basis including that of the Corporation, if any, in view of the
liquidation of Bank in respect of the alleged dues of the
Corporation. The Corporation in its correspondence, has
specifically stated that it had agreed under Ex.A-14 to refer the
matter to the Registrar of Co-operative Societies for taking action
as per Act, 1964 and also under Ex.A-16, the Corporation
intended to take steps for Arbitration as per the provisions of
Act, 1964.
22. It is pertinent to mention here that vide communication
dated 14th March 1996, the Corporation issued a letter to the
Chief Executive Officer of the Bank, whereby stated that if the
Bank fails to repay the proceeds of Rs.100 Lakhs along with
interest, they will proceed to recover the same by filing an
arbitration case and approach the Court of law for taking
criminal action against the Bank. In view of the categorical
admission of the Corporation, whereunder, the Corporation has
categorically referred to approaching the Registrar of Co-
operative Societies for settlement of dues by filing Arbitration
case, but in fact, has approached the Court below by filing the
suit. The same goes to show that the Corporation and the Bank,
both being Co-operative Societies, the provisions of Act, 1964
applies, which provides for settlement of disputes before the
Arbitrator under the provisions of Section 61(1)(d) of Act, 1964,
which reads as under :
Disputes which may be referred to the Registrar :-
(i) Notwithstanding anything contained in any law for
the time being in force, if any dispute touching the
constitution, management or the business of a
society, other than a dispute regarding disciplinary
action taken by the society or its committee against a
paid employee of the society arises
(a)..
(b)..
(c).
(d) between the society and any other society, such
dispute shall be referred to the Registrar for decision..
23. In addition to above, Section 126 of Act, 1964 reads as
under :
126. Notice necessary in suit :- No suit shall be instituted
against a society or any of its officers in respect of any act
touching the constitution, management or the business of the
society until the expiration of sixty days next after notice in
writing has been delivered to the Registrar, or left at his
office stating the cause of action, the name, description and
place of residence of the plaintiff and the relief which he
claims and the plaint shall contain a statement that such
notice has been so delivered or left.
In view of above provision, notice is to be issued by the plaintiff
before filing the suit and no suit shall be instituted against a
Society without a notice in writing has been delivered to the
Registrar.
24. It is pertinent to mention here that PW-1/D.Anil Kumar,
Junior Accounts Officer of the Corporation, deposed in the
cross-examination that he did not know whether the Corporation
had issued any Statutory notice under Section 126 of Act, 1964
before filing the suit. More over, he had no idea as the Bank and
the Corporation being Co-operative Societies, whether an
Arbitration claim has to be made under Section 61(1)(d) of Act,
1964. He admitted that under Ex.A-16, the Corporation intended
to take action for Arbitration as per provisions of Act, 1964,
however, he had no idea whether the Corporation had taken any
action under Act, 1964, under Exs.A-14 and A-16. The said
witness admitted that they have received Rs.5,00,000/- vide
Cheque No.77519, dated 24.03.2001 from the Bank under the
letter, which is Ex.B-1. He further admitted that the total amount
paid by the Bank after filing the suit is Rs.2,29,00,000/- and odd.
He further admitted that the amount paid by the Bank to the tune
of Rs.2,29,00,000/- and odd includes the principal amount of
Rs.163 Lakhs and the balance is towards interest. The said
witness also admitted that as per bye-law No.5(ii), the Bank is to
accept deposits and pay back on demand. Under bye-law No.41,
the Bank is entitled to receive deposits as per Act, 1964. He also
admitted that before filing the application to implead the
Liquidator, the permission of Registrar of Co-operative Societies
was not obtained. He further admitted that before filing the suit
and impleading the Liquidator, no prior notice was issued.
25. In view of above facts and statutory provisions, we are of
the opinion that the Court below failed to see that the provisions
of Section 126 of Act, 1964, which stipulates that no suit shall be
instituted against a Society or any of its officers in respect of any
act touching the constitution, management or the business of the
Society, until the expiry of 60 days next after notice in writing
has been delivered to the Registrar. PW-1 in his deposition, has
made admission that no notice as contemplated under Act, 1964
has been issued before filing of suit and before impleading the
Liquidator/appellant No.2 herein. The said fact has been
overlooked by the Court below. However, the Court below has
erred in holding that the correspondence made by the
Corporation can be treated as notice under Section 126 of Act,
1964. In addition to above, the Court below failed to see that
filing of suit without seeking leave of the Registrar of Co-
operative Societies is barred under Section 121(2) of Act, 1964.
The trial Court has ignored the fact that PW-1 made relevant
admissions that before filing the application to implead the
Liquidator, permission of Registrar of Co-operative Societies was
not obtained. Accordingly, the Court below erred in holding that
sanction under Section 121(2) of Act, 1964 is not applicable to
the suit, as the liquidation proceedings had been commenced only
after filing of the suit. We are of the opinion that Section 121(2)
of Act, 1964 is applicable even in the pending suits.
26. The trial Court further failed to see the relevant admission
of PW-1 in cross-examination dated 17.12.2002 that the
principal business of the Bank is to accept deposits and to pay
back on demand. Thus, the Court below has erred in holding that
payment of Fixed Deposits or interest are only monetary
transactions but not the business of the Bank. The Court below
has also failed to see that the main activity of the Bank is
Banking business. Hence, in our opinion, Section 61(1)(d) of
Act, 1964 is squarely applicable. It is pertinent to mention that
orders in C.R.P.No.860 of 2002 were passed by this Court
confirming the orders of this Court in I.A.No.42 of 2002, refusing
to frame the issues for want of pleadings in the written statement.
However, the said case is not applicable for the facts and
circumstances of this case.
27. In the case of V.J.Dandekar v. Meera Co-operative
Housing Society Limited, Hyderabad , a learned Single Judge of
this Court held that notice contemplated under Section 126 of
Act, 1964 has to be strictly construed and it has to be complied
with accordingly. The words touching the business of a society
in Section 126 of Act, 1964 must be given their full import
bearing in mind the object of the Legislation. The disputes are
not to be restricted to matters arising from and out of the
business of the society but are also extended to matters which are
in some way concerned or related to the business of the society.
28. In the case in hand, as admitted by PW-1, though the very
business of the Bank was to accept deposits and pay back to the
depositors along with interest, the procedure contemplated under
Section 126 of Act, 1964 has not been complied with before
instituting the suit.
29. In case of Karimnagar District Co-operative Central
Bank Ltd. V. Mogili Bakka Veeraiah and another , a learned
Single Judge of this Court held that the suit filed by the plaintiff
against the Karimnagar District Co-operative Central Bank
Limited without giving the requisite notice under Section 126 of
Act, 1964 is not properly instituted. Accordingly, the said Court
set aside the order of the trial Court.
30. In the case of Jas Raj Ganeshmal v. A.P.Dairy
Development Co-operative Federation Limited , a learned
Single Judge of this Court held that filing of any suit is barred
unless and until notice thereunder is given to the Registrar in
respect of any act touching the constitution, management or the
business of the Society. Admittedly, in the present case, no such
notice is given to the Bank nor to the Registrar of Co-operative
Societies.
31. In view of above discussion and legal position, we hereby
set aside the decree and judgment dated 11.02.2003, passed by
the VII-Additional Chief Judge, City Civil Court, Hyderabad
in O.S.No.246 of 1998. Consequently, we allow the present
appeal by giving liberty to the Corporation to take steps as per
law, for recovery of amount, if any. No order as to costs.
Pending miscellaneous applications, if any, shall stand
closed.
________________________
SURESH KUMAR KAIT, J
________________
N. BALAYOGI, J
21st September 2017
CCCA.No.320 of 2003
21-09-2017
Aryan Co-operative Urban Bank Ltd., Nallakunta, Rep. by its Liquidator & another...Appellants
A.P.Womens Co-operative Finance Corporation Ltd.,Ameerpet, Hyderabad, rep. by its Managing Director & others..Respondents
For Appellants:Sri Kishore Rai, Advocate.
For Respondent No.1 : Sri J.S.Raju, Standing Counsel for A.P.Womens Co-operative Finance Corporation Ltd.
<Gist:
>Head Note:
? CITATIONS:
1. 2000 (1) ALD 499
2. AIR 1981 AP 180
3. 2004 (1) ALD 878
HONBLE SRI JUSTICE SURESH KUMAR KAIT
AND
HONBLE SRI JUSTICE N. BALAYOGI
CITY CIVIL COURT APPEAL No.320 of 2003
JUDGMENT : (Per Honble Sri Justice Suresh Kumar Kait)
Vide the present appeal, the appellants have assailed the
order dated 11th February 2003, passed by the VII-Additional
Chief Judge, City Civil Court, Hyderabad, in O.S.No.246 of
1998, whereby, the aforesaid suit has been decreed for
Rs.1,95,30,891.55 ps., with interest @ 13.5% p.a. from the date
of the suit till the date of realization. The 1st respondent/plaintiff-
Corporation was directed to give credit to the tune of
Rs.1,65,76,205/- made by the 1st appellant-Bank during the
pendency of the suit on the respective dates of payments.
2. The 1st respondent-Corporation filed aforementioned suit
by stating that the A.P. Women Co-operative Finance
Corporation Ltd., Ameerpet, Hyderabad (hereinafter shall be
referred to as Corporation) was established in the year 1975 on
the eve of the International Women Year. The twin objectives of
International Women Year were; promotion of equality between
men and women and the active involvement of women in
National development. The Corporation had undertaken the
massive programme of employment oriented Agro industries,
Cottage and small scale industries by providing technical
assistance, financial assistance etc. The Corporation, in order to
raise funds, advanced loans, encouraged thrifts and invested
surplus funds by depositing in the 1st appellant-Bank (hereinafter
shall be referred to as the Bank), as under :
1. Rs.25,00,000/- (Rupees Twenty Five Lakhs)
invested on 5-7-1993 for 90 days @ 14% and
renewed for 90 days upto 27-3-1995 and further
one year upto 27-3-1996 at 13% and further
renewed upto date at the same rate.
2. Rs.24,00,000/- (Rupees Twenty Four Lakhs)
invested for one year at 13% upto 31-3-1995 and
renewed for a further period of one year upto
31-3-1996 at 13% and further renewed upto date
at the same rate.
3. Rs.14,00,000/- (Rupees Fourteen Lakhs only)
invested for one year upto 31-3-1995 and
renewed for a further period of one year upto 31-
3-1996 at 13% and further renewed upto date at
the same rate.
4. Rs.12,00,000/- (Rupees Twelve Lakhs only)
invested for one year upto 31-3-1995 and
renewed for a further period of one year upto 31-
3-1996 at 13% and further renewed upto date at
the same rate.
3. Before aforementioned deposits, the Administrative Officer
of the Bank addressed a letter dated 14.07.1994 to the
Corporation to mobilise deposits in their Bank and promised that
they will pay more interest than the other Nationalised Banks i.e.
@ 10.5% p.a. on the deposited amount. Basing on the above
noted letter, the Corporation was convicted and issued Cheques
bearing Nos.740890 and 740891, both dated 15.07.1994, for
Rs.50,00,000/- each, in the Bank, with an undertaking to deposit
the above said two amounts for a period of one year with interest
@ 10.5% p.a. It was agreed between the Bank and the
Corporation to pay interest quarterly. Accordingly, the
Corporation requested the Bank to send interest on earlier FDRs
as under :
F.D.R. & Date F.D.R. Amount Qly Int.payable
(Rs.) For the period
1. 6892 dt.31-3-1994 25,00,000/- 31-3-94 to 28-6-94
2. 6896 dt.31-3-1994 14,00,000/- -do-
3. 6895 dt.31-3-1994 12,00,000/- -do-
4. 6893 dt.31-3-1994 5,00,000/- -do-
5. 6894 dt.31-3-1994 24,00,000/- -do-
===============================================
However, the 3rd respondent/3rd defendant i.e. the Chief Executive
Officer of the Bank, instead of repaying the interest, by letter
dated 05.04.1995, requested to renew FDR Nos.6892 to 6896 for
a further period of one year. By letter dated 26.07.1995, the 3rd
respondent requested to renew FDR Nos.3311 and 3312 of
Rs.50,00,000/- each, carrying interest @ 10.5% p.a. The 3rd
respondent assured to pay interest quarterly @ 13.5% p.a. if the
FDRs are renewed and requested to send two FDRs fell due on
15.07.1995. Accordingly, the Corporation, by a letter dated
28.07.1995, agreed for the renewal for a further period of 180
days from 16.07.1995 and instructed to pay interest on the above
deposits with Bankers Cheque in the name of the Managing
Director of the Corporation and stated that the agreed interest
shall be @ 13.5% p.a. from the date of renewal. The Bank
acknowledged the receipt of the above said FDRs. The Bank had
issued two cheques vide Cheque No.291936 for an amount of
Rs.2,67,123.25 ps., and another Cheque No.291937 for an
amount of Rs.3,02,054.80 ps. The said cheques were
dishonoured due to non-availability of funds. However, the
Bank, by letter dated 14.09.1995, again sent the Bankers Cheque
for the said amounts, vide cheque No.975577.
4. Further case of the Corporation is that by letter dated
26.09.1995, made it clear that if quarterly interest is not paid
within two days, the entire deposited amount would be
withdrawn from the Bank. In the very same letter, the
Corporation made it clear that the Bank is due to pay a sum of
Rs.10,37,150.75 ps., towards interest on the total amount i.e.
Rs.1,80,00,000/-. The Chief Executive Officer of the Bank, by
letter dated 12.10.1995, paid Rs.5,50,630.05 by cheque
No.759587, dated 12.10.1995, drawn on Andhra Bank, adjusted
towards interest upto 30.09.1995. As the Bank was not paying
the interest quarterly as promised even after regular persuasion
and letters and telephonic calls and due to dishonouring of
cheques, the Corporation had decided to renew the deposits only
for 100 days instead of 180 days. The Bank had acknowledged
in the same letter dated 19.10.1995 that two FDRs worth
Rs.50,00,000/- each were received on 25.10.1995. The
Corporation, by letter dated 14.12.1995, made it further clear
that the deposit of 100 Lakhs only will be renewed only for a
period of 100 days instead of 180 days. The Corporation also
requested the 3rd respondent/the Chief Executive Officer of the
Bank to make payments along with accrued interest by means of
Bankers cheque. Inspite of the same, the 3rd respondent, by letter
dated 15.12.1995, requested to continue the deposits till
31.12.1995.
5. The further case of the Corporation is that the President of
the Bank had addressed a letter dated 03.01.1996, expressing
regrets over the non-materialisation of FDRs on 31.12.1995 due
to financial crisis. However, he assured that necessary
arrangements for payment of FDR Nos.3311 and 3312 along
with interest due as on that date will be made. By letter dated
29.01.1996, the Corporation requested the 3rd respondent to pay
the amount along with interest upto 31.12.1995. However, the
3rd respondent by letter dated 02.03.1996, again requested to
renew the FDRs for a further period of one year. The
Corporation, again by letter dated 14.03.1996, expressed its
regrets over non-payment of Rs.180 Lakhs along with interest.
The 3rd respondent, by letter dated 17.10.1996, made it clear that
they want to repay all the deposits particularly institutional
authorities and requested for extension of deposits and assured
for payment upto March 1997. In letter dated 13.06.1996, the
Corporation enclosed the Five FDRs worth Rs.80,00,000/- and
same was acknowledged by letter dated 13.06.1996. The 3rd
respondent, by letter dated 08.11.1996, along with the statement
of account of the Bank dated 11.02.1997, sent a letter and
statement of account and further requested for extension of time
of 10 months to pay atleast the interest.
6. The Bank, by letter dated 16.07.1997, enclosed a cheque
bearing No.1537475, dated 16.07.1997 for Rs.5,00,000/- drawn
on APCOB, Vidyanagar Branch towards repayment of FDR
No.13971 and assured further that he shall make upto date
payment by the end of October, 1997. The Bank, in the same
letter, mentioned that it shall pay every month certain amounts
towards principal and interest adjustments of above mentioned
FDRs. However, even after letter dated 16.07.1997, the
Corporation did not receive any amount, for which, a legal notice
was issued on 22.09.1997 and the same was received and duly
acknowledged on 23.09.1997. Thereafter, the Corporation issued
rectified legal notice dated 28.09.1997 and received
acknowledgement on 03.10.1997 from respondent No.3 vide
letter dated 11.02.1997 along with a detailed statement of
account of payment of interest on FDRs. Since the Corporation
did not receive the amount, it filed a suit with a prayer to pass a
decree in its favour and against the Bank for a sum of
Rs.1,95,30,891.55 ps., and grant interest as per the contract rate
from the date of suit till the date of realisation and costs.
7. The case of the Bank as per the written statement is that
they approached the Corporation in usual course of business for
deposits, out of surplus funds available with the Corporation.
Accordingly, the Corporation invested an amount of
Rs.25,00,000/- on 05.07.1993 for a period of 90 days and the
rate of interest @ 14% p.a. and the FDRs were renewed from
time to time and further renewed for one year from 27.03.1995 to
27.03.1996 with interest @ 13% p.a. The same was renewed
upto date and the interest payable on above FDRs till 26.03.1996
was already paid. As on 26.03.1998, the amount due was
Rs.31.50 Lakhs consisting of Rs.25 Lakhs principal amount and
Rs.6.50 Lakhs interest payable from 27.03.1996 to 26.03.1998.
The Bank was agreed to pay the above dues within reasonable
time. Originally, the deposit was made for a period of one year
for a sum of Rs.24 Lakhs vide FDR No.6894, dated 31.03.1994
and the same was renewed for one more year, and further
renewed till 31.03.1996 vide FDR No.13969. The interest
payable on the above FDR upto 31.03.1996 amounting to
Rs.6,24,854.80 was fully paid by the Bank. Apart from the
interest, a sum of Rs.4,00,000/- was paid towards partial
payment of principal in February, 1998. Hence, the intention of
defaulting on the part of the Bank does not arise. The amount
payable on the above FDRs till 31.03.1998 would be
Rs.26,17,731.50 ps., consisting of Rs.20,00,000/- towards
principal and Rs.6,17,731.50 ps., towards interest.
8. Further case of the appellants is that another deposit was
made by the Corporation vide FDR No.6896, dated 31.03.1994
for a sum of Rs.14 Lakhs for a period of one year and the same
was further renewed for one more year till 31.03.1996. The
appellant had paid full principal amount of Rs.14 Lakhs together
with interest of Rs.6,40,704/- payable till 31.03.1996. The
deposit of Rs.12 Lakhs was made by the Corporation on
31.03.1994 vide FDR No.6895, for one year. The principal
amount of Rs.12 Lakhs together with interest of Rs.4,55,178.10
ps., payable till 31.03.1995 was already paid by the Bank.
However, the cheques were dishonoured only on technical
grounds and not for want of funds. The Bank was operated by
the Committee Members as per the old bye-laws. The said bye-
laws were amended with effect from 05.12.1994 and
subsequently, the bank operations were entrusted to the
Managing Committee. Accordingly, the Bank submitted the
signatures of the officers of the concerned Bank for allowing
operation of accounts. Meanwhile, the Bank had issued cheques
in good faith, however, the concerned Bank i.e. Andhra Bank of
Vidyanagar Branch dishonoured the cheques and sought the
approval of Registrar for attestation of the new signatures. The
attestation process was delayed for want of clarification from the
head office i.e. Registrar of Co-operative Societies. These are the
circumstances under which the cheques issued in favour of the
Corporation were bounced and the said fact was communicated
to the Corporation.
9. Further case of the Bank is that inspite of their intention
for repaying the amount, the Corporation, in haste, filed the suit
instead of approaching the Arbitrator for settlement of dispute
under Section 61 of Act, 1964. However, in the interest of
business relations, the Bank considered to pay interest only on
the outstanding FDRs for further period from the last date with
the date of clearance of the FDRs and that the Bank was
prepared to pay the FDRs along with interest as stated below :
F.D.R. 3311 Rs.50 Lakhs
F.D.R. 3311 Rs.50 Lakhs
F.D.R. 3311 Rs.25 Lakhs
F.D.R. 3311 Rs.20 Lakhs (As Rs.4 Lakhs was
already
Paid against Rs.24 Lakhs)
-----------------
Rs.145 Lakhs
-----------------"
It is the further case of the Bank that if the Corporation is
agreeable to convert the above FDRs into lower denominations,
renewal of FDRs with lower denominations is proposed as
follows:
March, 1998 Rs.10 Lakhs.
April, 1998 Rs.10 Lakhs.
May, 1998 Rs.10 Lakhs.
June, 1998 Rs.10 Lakhs.
July, 1998 Rs.20 Lakhs.
August, 1998 Rs.20 Lakhs.
September, 1998 Rs.20 Lakhs.
October, 1998 Rs.20 Lakhs.
November, 1998 Rs.20 Lakhs.
December, 1998 Balance amount.
10. Further case of appellants is that the Bank had paid
Rs.44,99,901/- towards interest alone against various FDRs
apart from the payment of Rs.35 Lakhs towards principal
amount. The Bank denied in toto the alleged amount of
Rs.1,95,30,891.50 ps., as demanded by the Corporation, as the
suit amount was not covered under any specific contract between
the Bank and the Corporation. The Bank was agreeable, in the
absence of any specific contract, to pay the interest on matured
deposits as per the directives of RBI only. Therefore, the interest
during the tenure of suit or after the expiry of respective due
dates of FDRs, is denied.
11. Basing on the plaint allegations and after considering the
written statement of the Bank, the trial Court initially framed the
following issues :
1. Whether the plaintiff is entitled for recovery of the
suit amount
2. To what relief
12. After filing written statement by defendant No.4 i.e. Special
Category Deputy Registrar/Liquidator, Aryan Co-operative
Urban Bank Ltd., Nallakunta, Hyderabad, who was impleaded as
defendant No.4 as per order of the trial Court dated 08.12.2002
passed in I.A.No.295 of 2002, additional issues were framed on
11.12.2002 as under :
1. Whether the suit is barred U/Sec.121(2) of A.P.
Co-operative Act,. 1964
2. Whether the suit is maintainable for non-
compliance of Sec.126 of the A.P. Co-operative
Societies Act, 1964
3. Whether the suit is maintainable in view of the
Sec.61(1)(d) of A.P. Co-operative Act, 1964
13. It is pertinent to mention here that the main dispute
between the Bank and the Corporation is with regard to the
payment of interest due on matured Fixed Deposits made by the
Corporation with the Bank. So far as the transactions i.e. the
deposits and the rate of interest are concerned, the same are not
in dispute. The main contention of the Bank is that the suit was
not maintainable and a reference under Section 61(1)(d) of Act,
1964 should have been made; that no notice had been issued
under Section 126 of Act, 1964; and in view of the winding up of
the Bank, the Civil Courts jurisdiction is barred under Section
121(2) of Act, 1964.
14. However, the learned trial Court opined that the liability of
the Bank arises on account of fixed deposits made by the
Corporation under Term Deposit Receipts, which carry interest
specified thereon and as such the liability of the Bank arises
under a monetary transaction as a Banker and the said liability
had also been duly acknowledged under Exs.B-3 to B-19, B-21
and B-22. The said liability is only on Banker and the same is
not touching with the management or the business of the Bank so
as to attract the provisions under Section 61(1)(d) of Act, 1964.
This matter with regard to the issue was negated by the trial
Court and the revision preferred vide C.R.P.No.860 of 2002 was
dismissed by the High Court confirming the orders of the trial
Court. As such, the issue had become redundant and since it
does not touch the business or management, the suit filed by the
Corporation was maintainable.
15. With regard to issuance of notice under Section 126 of Act,
1964, the learned Court below opined that the same does not
arise at all since before filing of the suit, the Corporation
addressed various letters calling upon the Bank for payment of
outstanding amounts, to which, the Bank replied, requesting for
renewal, and thus, there being no specific form of notice
prescribed under Section 126 of Act, 1964 and the nature of
liability being one of a trustee as a Banker to repay the amounts
due as on the date, the said provision is not applicable and on the
other hand, duly complied with.
16. Insofar as bar of jurisdiction of civil Court under Section
121(2) of Act, 1964 is concerned, it is held by the trial Court that
only in respect of the Societies which are contemplating winding
up or being liquidated, and in the present suit, the said defence is
not available, since admittedly, by the date of filing of the suit, no
such proceedings were either contemplated or pending, but it was
only during pendency of suit, the liquidation proceedings were
started i.e. nearly three years after filing of the suit, and as such,
Section 121 (2) of Act, 1964 has no application.
17. Admittedly, the Bank repaid certain amounts towards the
discharge of their liability and the same are reflected in the
written arguments of the Corporation. Insofar as the balance
amount is concerned, it remains unpaid and in view of admission
on the part of the Bank offering a particular rate of interest, they
are bound to repay the same with agreed and undertaken interest.
18. We have heard learned counsel for the appellants and the
Corporation and perused the material on record.
19. As mentioned above, defendant No.4 i.e. the Special
Category Deputy Registrar/Liquidator of the Bank was
appointed in pursuance of the order of the Joint Registrar/DCO,
dated 05.09.2002, whereunder, the Joint Registrar passed orders
to liquidate the Bank. The copy of the order was filed before the
trial Court. In view of the same, the Corporation, without
seeking leave of the Registrar of Co-operative Societies, is not
entitled to sue the Bank, in view of Section 121(2) of Act, 1964,
which reads as under :
While a society is being wound up, no suit or other
legal proceeding relating to the business of such society
shall be proceeded with, or instituted against, the
liquidator as such or against the society or any member
thereof on any matter touching the affairs of the society
except by leave of the Registrar and subject to such
terms and conditions as he may impose :
Provided that where the order of winding up is
cancelled, the provisions of this sub-section shall cease
to apply in relation to the society and any member
thereof, but shall continue to apply to the person who
acted as liquidator.
20. As per the said provision, without seeking leave of the
Registrar of Co-operative Societies, the Corporation was not
entitled to sue the Bank. However, before going further, it is
pertinent to mention here that the business of the Bank, as stated
in the bye-laws, more particularly bye-law No.5(ii), is as under :
to accept the deposits or money from the public,
repayable on demand or otherwise, and withdrawable
by cheque, draft order as per Bye-laws No.41 which
reads as under :
(i) Deposits may be received at any time
within the limits determined under Co-
operative Societies Act and Rules on
such rates of interest and subject to
such rules regulations as may be fixed
by the Board of Directors and also
subject to the directives issued by the
Reserve Bank of India in this behalf
from time to time.
(ii) Deposits may be received on current,
savings, fixed, recurring, cumulative
and under any other special
scheme(s).
21. It is not in dispute that during the course of business, the
Bank had approached the Corporation to invest surplus funds
and the same is admitted by the Corporation in the plaint. As
such, the trial Court has no jurisdiction to try the suit under the
provisions of Section 61(1)(d) of Act, 1964. Accordingly, the
claim of the Corporation had to be sent to the Deposit Insurance
Credit Guarantee Corporation of the Reserve Bank of India for
settlement of claims upto Rs.1,00,000/- and any other claim made
to the Liquidator, the Liquidator has to settle such claim on pro-
rata basis including that of the Corporation, if any, in view of the
liquidation of Bank in respect of the alleged dues of the
Corporation. The Corporation in its correspondence, has
specifically stated that it had agreed under Ex.A-14 to refer the
matter to the Registrar of Co-operative Societies for taking action
as per Act, 1964 and also under Ex.A-16, the Corporation
intended to take steps for Arbitration as per the provisions of
Act, 1964.
22. It is pertinent to mention here that vide communication
dated 14th March 1996, the Corporation issued a letter to the
Chief Executive Officer of the Bank, whereby stated that if the
Bank fails to repay the proceeds of Rs.100 Lakhs along with
interest, they will proceed to recover the same by filing an
arbitration case and approach the Court of law for taking
criminal action against the Bank. In view of the categorical
admission of the Corporation, whereunder, the Corporation has
categorically referred to approaching the Registrar of Co-
operative Societies for settlement of dues by filing Arbitration
case, but in fact, has approached the Court below by filing the
suit. The same goes to show that the Corporation and the Bank,
both being Co-operative Societies, the provisions of Act, 1964
applies, which provides for settlement of disputes before the
Arbitrator under the provisions of Section 61(1)(d) of Act, 1964,
which reads as under :
Disputes which may be referred to the Registrar :-
(i) Notwithstanding anything contained in any law for
the time being in force, if any dispute touching the
constitution, management or the business of a
society, other than a dispute regarding disciplinary
action taken by the society or its committee against a
paid employee of the society arises
(a)..
(b)..
(c).
(d) between the society and any other society, such
dispute shall be referred to the Registrar for decision..
23. In addition to above, Section 126 of Act, 1964 reads as
under :
126. Notice necessary in suit :- No suit shall be instituted
against a society or any of its officers in respect of any act
touching the constitution, management or the business of the
society until the expiration of sixty days next after notice in
writing has been delivered to the Registrar, or left at his
office stating the cause of action, the name, description and
place of residence of the plaintiff and the relief which he
claims and the plaint shall contain a statement that such
notice has been so delivered or left.
In view of above provision, notice is to be issued by the plaintiff
before filing the suit and no suit shall be instituted against a
Society without a notice in writing has been delivered to the
Registrar.
24. It is pertinent to mention here that PW-1/D.Anil Kumar,
Junior Accounts Officer of the Corporation, deposed in the
cross-examination that he did not know whether the Corporation
had issued any Statutory notice under Section 126 of Act, 1964
before filing the suit. More over, he had no idea as the Bank and
the Corporation being Co-operative Societies, whether an
Arbitration claim has to be made under Section 61(1)(d) of Act,
1964. He admitted that under Ex.A-16, the Corporation intended
to take action for Arbitration as per provisions of Act, 1964,
however, he had no idea whether the Corporation had taken any
action under Act, 1964, under Exs.A-14 and A-16. The said
witness admitted that they have received Rs.5,00,000/- vide
Cheque No.77519, dated 24.03.2001 from the Bank under the
letter, which is Ex.B-1. He further admitted that the total amount
paid by the Bank after filing the suit is Rs.2,29,00,000/- and odd.
He further admitted that the amount paid by the Bank to the tune
of Rs.2,29,00,000/- and odd includes the principal amount of
Rs.163 Lakhs and the balance is towards interest. The said
witness also admitted that as per bye-law No.5(ii), the Bank is to
accept deposits and pay back on demand. Under bye-law No.41,
the Bank is entitled to receive deposits as per Act, 1964. He also
admitted that before filing the application to implead the
Liquidator, the permission of Registrar of Co-operative Societies
was not obtained. He further admitted that before filing the suit
and impleading the Liquidator, no prior notice was issued.
25. In view of above facts and statutory provisions, we are of
the opinion that the Court below failed to see that the provisions
of Section 126 of Act, 1964, which stipulates that no suit shall be
instituted against a Society or any of its officers in respect of any
act touching the constitution, management or the business of the
Society, until the expiry of 60 days next after notice in writing
has been delivered to the Registrar. PW-1 in his deposition, has
made admission that no notice as contemplated under Act, 1964
has been issued before filing of suit and before impleading the
Liquidator/appellant No.2 herein. The said fact has been
overlooked by the Court below. However, the Court below has
erred in holding that the correspondence made by the
Corporation can be treated as notice under Section 126 of Act,
1964. In addition to above, the Court below failed to see that
filing of suit without seeking leave of the Registrar of Co-
operative Societies is barred under Section 121(2) of Act, 1964.
The trial Court has ignored the fact that PW-1 made relevant
admissions that before filing the application to implead the
Liquidator, permission of Registrar of Co-operative Societies was
not obtained. Accordingly, the Court below erred in holding that
sanction under Section 121(2) of Act, 1964 is not applicable to
the suit, as the liquidation proceedings had been commenced only
after filing of the suit. We are of the opinion that Section 121(2)
of Act, 1964 is applicable even in the pending suits.
26. The trial Court further failed to see the relevant admission
of PW-1 in cross-examination dated 17.12.2002 that the
principal business of the Bank is to accept deposits and to pay
back on demand. Thus, the Court below has erred in holding that
payment of Fixed Deposits or interest are only monetary
transactions but not the business of the Bank. The Court below
has also failed to see that the main activity of the Bank is
Banking business. Hence, in our opinion, Section 61(1)(d) of
Act, 1964 is squarely applicable. It is pertinent to mention that
orders in C.R.P.No.860 of 2002 were passed by this Court
confirming the orders of this Court in I.A.No.42 of 2002, refusing
to frame the issues for want of pleadings in the written statement.
However, the said case is not applicable for the facts and
circumstances of this case.
27. In the case of V.J.Dandekar v. Meera Co-operative
Housing Society Limited, Hyderabad , a learned Single Judge of
this Court held that notice contemplated under Section 126 of
Act, 1964 has to be strictly construed and it has to be complied
with accordingly. The words touching the business of a society
in Section 126 of Act, 1964 must be given their full import
bearing in mind the object of the Legislation. The disputes are
not to be restricted to matters arising from and out of the
business of the society but are also extended to matters which are
in some way concerned or related to the business of the society.
28. In the case in hand, as admitted by PW-1, though the very
business of the Bank was to accept deposits and pay back to the
depositors along with interest, the procedure contemplated under
Section 126 of Act, 1964 has not been complied with before
instituting the suit.
29. In case of Karimnagar District Co-operative Central
Bank Ltd. V. Mogili Bakka Veeraiah and another , a learned
Single Judge of this Court held that the suit filed by the plaintiff
against the Karimnagar District Co-operative Central Bank
Limited without giving the requisite notice under Section 126 of
Act, 1964 is not properly instituted. Accordingly, the said Court
set aside the order of the trial Court.
30. In the case of Jas Raj Ganeshmal v. A.P.Dairy
Development Co-operative Federation Limited , a learned
Single Judge of this Court held that filing of any suit is barred
unless and until notice thereunder is given to the Registrar in
respect of any act touching the constitution, management or the
business of the Society. Admittedly, in the present case, no such
notice is given to the Bank nor to the Registrar of Co-operative
Societies.
31. In view of above discussion and legal position, we hereby
set aside the decree and judgment dated 11.02.2003, passed by
the VII-Additional Chief Judge, City Civil Court, Hyderabad
in O.S.No.246 of 1998. Consequently, we allow the present
appeal by giving liberty to the Corporation to take steps as per
law, for recovery of amount, if any. No order as to costs.
Pending miscellaneous applications, if any, shall stand
closed.
________________________
SURESH KUMAR KAIT, J
________________
N. BALAYOGI, J
21st September 2017
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