Writ Petition No.1435 of 1992

27th October, 2004

Petitioner Counsel: Shri. C. S. KAPTAN
Respondent Counsel: Shri. T. R. KANKALE

Cases Cited:
Ramchandra Vs. Collector, Nagpur, 1970 Mh.L.J. 116 [Para 6,8]

JUDGMENT

JUDGMENT :- The petitioners are borrowers of respondent No.1 - Bank and said Bank initiated proceedings for recovery of loan amount from them before Respondent No.2 - Deputy Registrar. The said authority has issued a recovery certificate on 29-06-1992 and the same is challenged before this Court in the present petition under Articles 226 and 227 of Constitution of India.

2. The petitioners are members of Respondent No.1 which is a Co-operative Society registered as such under the provisions of Maharashtra Co-operative Societies Act, 1960, (hereinafter referred to as the Act). The said society has filed application under Section 101 before Respondent No.2 for recovery of Rs.1,11,059.05 from the petitioners jointly and severally with interest @ 19.5% per annum. The said case was registered as Dispute No.1973 of 1992 before Respondent No.2 on 03-02-1992, the said authority directed the petitioners to appear before it and to file their say to deposit the amount within three days. It was stated that if the petitioners fail to appear or fail to deposit the amount as stipulated in it, the recovery certificate shall be issued in favour of Respondent No.1 - Bank. The petitioners appeared before the said authority and filed their reply on 21-02-1992. They denied the claim of Respondent No.1 and also further denied that their liabilities are joint or several or co-extensive. They also denied the locus of person approaching Respondent No.2 on behalf of Respondent No.1 under Section 101 of the Maharashtra Co-operative Societies Act. They also pointed out that the allegations made are extremely vague, no date of mortgage deed is mentioned, no date of promissory note is specified and further no date of executing the agreement of Rs.30,000/- is mentioned. They also pointed out that the claim is barred by limitation as it is filed after expiry of four years and three months.

3. It is the next contention of petitioners that after written statement, they were not heard at all and straight way they received a recovery certificate dated 22-06-1992 issued by Respondent No.2 under Section 101 of the Act. In the said recovery certificate, it was mentioned that the petitioners have to pay amount of Rs.1,11,059.05, expenses of Rs.1,542.65 and interest @ 19.5% per annum from 01-12-1991 onwards. Along with this, they also got a notice demanding back the loan issued under Section 107(3) and (11) of Maharashtra Co-operative Societies Rules, 1961, read with Section 98(B) and 156 thereof. By this notice dated 29-06-1992, total amount of Rs.1,23,725.35 was demanded from the petitioners till 06-07-1992. Thus, this recovery notice and certificate has been challenged in this petition.

4. On 10-07-1992, this Court while issuing notice before admission, restrained respondents from effecting any recovery and on 05-08-1992 while issuing rule, the recovery came to be stayed.

5. I have heard Shri. Kaptan, learned counsel for the petitioners, Shri. Kankale, learned counsel for respondent No.2. Nobody appeared for respondent No.1 earlier, i.e. on 21-10-2004 and today. No return is filed for the said respondent.

6. Shri. Kaptan, learned counsel for the petitioners, by placing reliance on Section 101 of the Maharashtra Co-operative Societies Act argues that Respondent No.2 is obliged to hold enquiry to ascertain the amount and also to ascertain the liability of petitioners. He states that no enquiry whatsoever has been held by Respondent No.2 and no opportunity of hearing has been given to the petitioners by said authority. He relies upon the reported judgment of this Court in the case of Ramchandra Vs. Collector, Nagpur, reported in 1970 Mh.L.J. 116, to contend that if certificate is issued as a result of such an enquiry, it is vitiated and is liable to be quashed and set aside.

7. Shri. Kankale, learned Assistant Government Pleader appearing for Respondent No.2 states that the order passed is in accordance with law and hence no interference is called for.

8. The provisions of Section 101 of the Act deal with recovery of arrears of due to certain societies as arrears of land revenue. The relevant portion with which the petitioners are concerned appears at the end of Section 101(1) of the Act. It provides that the Registrar may, after making such inquiries as he deems fit, grant a certificate for the recovery of the amount stated in statement of accounts furnished by the society to be due as arrears. Thus, from the scheme of said Section 101(1), it is apparent that Respondent No.1 has to apply to Respondent no.2 for grant of recovery certificate and it has also to furnish a statement of accounts in respect of arrears. The Registrar has thereafter to make such inquiry as he deems fit and issue a certificate for the amount mentioned in the said statement of accounts. Provisions of Section 137 of the Act are on the same lines. Section 137(1) of the Act provides for recovery of loans by Agricultural and Rural Development Bank. The said Banks have got remedy of applying to the Registrar for recovery of arrears of any sum advanced by such Bank to any of its members and on its furnishing the statement of accounts in respect of arrears, the Registrar has to make such enquiry as he deems fit and then issue a certificate of amount stated therein, to be due as arrears. The said provision of Section 137 of the Act has been considered by the Division Bench of this Court in Ramchandra Vs. Collector, Nagpur (supra).

9. The arguments of respondents before the Division Bench are reproduced in para 18 and it was contended that such provision requires Registrar to issue a certificate in respect of recovery of amount stated therein to be due as arrears. It was argued that the question whether any amount, and if so, quantum of amount due by way of arrears involves an adjudication of the claim of the Land Development Bank, and if such an adjudication is to be made, it necessarily postulates an inquiry; and if it postulates an inquiry, it must necessarily mean that the opposite side i.e. the debtor from whom the arrears are due is to be noticed and heard. It was claimed that inspite of the use of the word "may", the power which is required to be exercised is coupled with a duty and that duty is that of making inquiry which is necessary, the only discretion being as to the manner or the extent of the inquiry. It was further argued that the Registrar who is approached by the Land Development bank for issue of a recovery certificate is not relived of an obligation to make an inquiry to find out whether any arrears, and if so, to what extent are due and only discretion Registrar has is about the nature and extent of such inquiry. These arguments are considered by the Division Bench in para 25. In this para, the Division Bench has also considered the arguments of Bank. The Bank had argued that it is required to make applications in large cases and if the interpretation of Section 137 as sought for by borrower is accepted, it will make the working not only difficult but procrastinate the proceedings, especially when the tendency to be in default is noticed on a large scale. The Division Bench says that it is not impressed by such argument of expediency at all. It is observed by the Division Bench that "if the law requires the exercise of the power in a particular manner and the principles of natural justice required that a hearing should be given to the debtor against whom a certificate with very serious consequences is being obtained, it is no answer to say that such inquiry will involve delay and to that extent frustrate the effectiveness of the provisions like section 137". In para 27 of this judgment, while holding that the recovery certificate issued was without jurisdiction and vitiated, the Division Bench has held :

"We are concerned with the more fundamental question whether the Bank was entitled to obtain a certificate under section 137 without giving a proper opportunity to the petitioners to show that the certificate could not be issued in respect of the amount for which it has been given or that the certificate should not be issued at all. It may be quite possible that in certain circumstances the defaulter may be able to persuade the Registrar or the person authorised by him that his was not a case where a certificate for recovery under Section 137 should issue at all. By not issuing a notice and by depriving him of giving an opportunity to be heard, the officer issuing the certificate has thus exercised the power which the law does not allow him to do without having observed this elementary rule."

10. In view of the language of Section 101 of the Act pointed out above, the ruling of the Division Bench discussed above will apply with its full vigour even to the inquiries under Section 101. Here, it is specifically pleaded by the petitioners in para 4 of their petition as also in ground I thereof that Respondent No.2 did not give them any opportunity and in ground No.2 of the petition, they have stated that respondent No.2 has issued the Recovery Certificate without any application of mind. It is further pointed out that Respondent No.2 did not hold any inquiry. In such circumstances, it is apparent that the certificate dated 22-06-1992 and the loan recovery notice dated 29-06-1992 at Annexure 4 with the petition are issued without holding any proper inquiry by Respondent No.2 and without giving any opportunity of hearing to the petitioners.

11. Hence, the said certificates are vitiated and are quashed and set aside. The matter is remanded back to Respondent No.2 to consider the application under Section 101 of the Act moved by Respondent No.1 - Bank before it i.e. Case No.1973 of 1992 and written statement filed by the present petitioners before it and to take appropriate decision as required by law after giving due opportunity of hearing to the parties.

12. Rule is made absolute in above terms. There shall be no order as to costs.

Petition allowed.