Statutory priority for deposit insurance reimbursement overrides competing liquidation claims until the corporation is repaid.

Section 21 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, read with Regulation 22 of the 1961 General Regulations, requires the liquidator to repay the Corporation amounts paid to insured depositors out of liquidation realizations after making provision for liquidation expenses and dividend. The statutory scheme gives the Corporation priority over competing claims in the liquidation of cooperative banks, including claims of depositors, creditors, workmen and government dues, until reimbursement is made. Even a depositor's decree does not displace this statutory priority, because repayment to the Corporation must be satisfied first within the liquidation framework.

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Issues: Whether the Deposit Insurance and Credit Guarantee Corporation was entitled to first repayment, after liquidation expenses and provision for dividend, before any payment to depositors, creditors, workmen or government dues in the liquidation of cooperative banks.

Analysis: The governing scheme under Section 21 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 obliges the liquidator to repay to the Corporation the amount paid by it to insured depositors. Regulation 22 of the Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961 requires such repayment to be made from realizations in the liquidator's hands after making provision for expenses payable by that time and for declaration of dividend. The statutory mandate gives the Corporation priority over other claimants, and the contrary view taken by the earlier order could not stand in light of the binding Supreme Court exposition of the same scheme. Claims of depositors, even where supported by a decree, remain subject to the statutory priority and can be satisfied only after the Corporation's repayment is made.

Conclusion: The Corporation was entitled to first preference in repayment after liquidation expenses and provision for dividend, and the contrary directions were set aside.

Ratio Decidendi: Where a statutory insurance scheme requires the liquidator to repay the deposit insurance corporation out of realizations after provision for expenses and dividend, that statutory priority overrides other claims in liquidation until the corporation is reimbursed.

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