Statutory repayment to deposit insurer must precede further distribution once liquidation threshold is met.

The Deposit Insurance and Credit Guarantee Corporation Act, 1961 gives the Corporation a statutory right to recover amounts paid to depositors from the liquidator. Section 21, read with Regulation 22, operates notwithstanding conflicting law and requires repayment once the liquidator's realisations, after provision for expenses, are sufficient to enable a dividend of at least one paisa in the rupee to each depositor. The scheme does not create a general priority over all creditors, but it does require the Corporation's repayment to be made before further distribution to other claimants once the statutory threshold is met. The liquidator must therefore apply the repayment mechanism before distributing surplus funds.

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Issues: Whether the Deposit Insurance and Credit Guarantee Corporation is entitled to repayment of the amounts paid to depositors in priority to other claims from the liquidator upon the liquidator having sufficient funds after making provision for expenses and dividend-related requirements.

Analysis: The statutory scheme under sections 17, 19 and 21 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 creates a right in favour of the Corporation to recover amounts paid by it to depositors. Section 21 operates notwithstanding anything contrary in other law, and Regulation 22 prescribes the stage at which repayment becomes due, namely when the liquidator's realisations and other amounts, after provision for expenses, are sufficient to enable declaration of a dividend of not less than one paisa in the rupee to each depositor. The provision does not create a general claim of priority over all creditors, but it does require the Corporation's repayment to be satisfied before further distribution to other creditors once the prescribed statutory threshold is reached. The later binding appellate decision adopting the same construction confirms that the liquidator must first comply with the statutory repayment obligation to the Corporation.

Conclusion: The Corporation's right to repayment under the statute was upheld and the petitioner's challenge to repayment in favour of the Corporation failed.

Final Conclusion: The liquidator must give effect to the statutory repayment mechanism in favour of the Corporation before distributing surplus amounts to other claimants, subject to the prescribed liquidation expenses and the statutory repayment threshold.

Ratio Decidendi: Where the statute and regulations prescribe repayment to the insurance corporation on the liquidator's realisations reaching the defined threshold after expenses, the liquidator cannot postpone that repayment by treating other creditors as entitled to earlier distribution.

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