TaxTMI 
TaxTMI 
2016 (2) TMI 1405
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation ( "the Corporation" for short) in pursuance of the requisitions dated 15.09.2015 and 22.09.2015 made by the Corporation, copies whereof are placed at Annexure A. [3] Learned advocate Mr. Patel for the petitioner submitted that as per Regulation no.22 framed under the Act, the Corporation is not entitled to return of the amounts paid by it for the depositors unless both the conditions in Regulation no. 22 are fully complied with. Mr. Patel submitted that the Corporation is not entitled to return of the amounts till all the depositors are fully paid by the liquidator. Mr. Patel relied on the decision of the learned Single Judge in the case of Deposit Insurance & Credit Guarantee Corporation, Mumbai v/s. State of Gujarat and Ors. reported in 2010(2) GLR 1327. Mr. Patel fairly stated that the decision of the learned Single Judge in the said case is overruled in Letters Patent Appeal No. 1300 of 2010 and other allied matters. Mr. Patel further pointed out that against the judgment of the Division Bench, Special Leave Petition No.22043 of 2015 is filed wherein leave is granted by the Hon'ble Supreme Court and hearing thereof is expedited. [4] The Court having heard learne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at time. Mr. Patel however, submitted that Regulation provides for first satisfying condition that the amount with the liquidator should be sufficient to enable him to declare dividend of not less than one paise in the rupee to each depositor. However, such provision is made to ensure that liquidator may be in position to repay the amount to the Corporation on finding that there are sufficient amount in his hands for which he is able to declare dividend of one paisa in the rupee to each depositor. Such provision in noway could be construed so as to dis-entitle the Corporation to get back the amounts paid by it to the depositors covered under the insurance. [6] Learned Single Judge in the case of Deposit Insurance (supra) has held and observed in paragraph no. 13 to 24 as under : - "13. The aforesaid can be a broad parameters for the Liquidator to decide the priority generally for cooperative societies and specifically for cooperative banks, which are also otherwise governed by the provisions of BR Act as per the observations made hereinabove. 14. The aforesaid takes me to examine the question for consideration of the priority claimed by the petitioner Corporati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e made to Section 115A(5) of the Act, which read as under: - "115A Order for winding up, reconstruction, supersession of committee, etc., of insured co- operative bank not to be made without sanction or regulation of Reserve Bank of India; - Notwithstanding anything contained in this Act, in the case of an insured co-operative bank- 1. XXX 2. XXX 2A XXX 3. XXX 4. XXX 5. the liquidator or such bank or the transferee bank, as the case may be, shall be under an obligation to pay the Deposit Insurance Corporation established under the Deposit Insurance Corporation Act, 1961 (47 of 1961), in the circumstances, to the extend and in the manner referred to in section 21 of the Act. Explanation: - In this section: - a) the expression 'insured co-operative bank' means a society which is an insured bank under the provisions of the Deposit Insurance Corporation Act, 1961 (47 of 1961) b) the expression 'transferee bank' in relation to an insured co-operative bank means a co- operative bank - (i) with which such insured co-operative bank is amalgamated, or (ii) to which the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng provision for expenses, to the respondent Corporation. 18. The net effect of the argument is that such repayment to be made to the Corporation would stand in priority over all the claims of all the creditors irrespective of the fact that whether they are secured or unsecured. Such contention is ill-founded inasmuch as the legislature has not used either under the Act or under the Regulation the language or words 'priority over any other debt'. Further, the liability to pay would accrue only when the dividend is to be declared to each depositor. Therefore, at a stage when the Liquidator reaches for making payment to the depositors of the Bank, the Corporation would be required to be paid first, since the minimum amount of such dividend is mentioned as not less than a paisa in the rupee. To say in other words, if the dividend is to be declared of even one per cent to the depositors of the Bank, the liability for repayment would be required to be discharged by the Liquidator to the Corporation. Hence, it is only at a stage when the dividend is to be declared to the depositor, the liability would accrue upon the Liquidator to make payment and consequently the right ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... get the amount proportionately with the other remaining amount of the depositor and as unsecured creditor it would be entitled to claim the amount after all payments are made to the depositors. As against the same, by virtue of the provisions of Section 21 of DICGC Act read with the Regulation 22, the claim of the Corporation would be above the depositors if the fund is available for dividend of 1 paisa in the rupee. It is only by virtue of the said provisions of Section 21 read with Regulation 22, amongst the depositors, the claim of the Corporation by way of repayment of the amount, which is already paid to the depositors would be required to be satisfied first and with that purpose, the Parliament has used the language of non-obstacle clause over any other liability for time being in force. Such non-obstacle clause is used, because in normal circumstances in any insolvency proceedings or in liquidation proceedings or winding up proceedings, the claim of the Corporation may rank for proportionate payments with the other depositors or may rank as unsecured creditor. With an intention to override such provisions of liquidation proceedings, the Parliament has used the non-obstacle ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the petitioner. However, it appears that whether permission of Reserve Bank of India was taken or not is the question of fact, which is not required to be gone into by this Court in the present proceedings. Further, whether the other Banks who have claimed the status as that of the secured creditors or not will have to be decided by the Liquidator on the basis of the record available as to whether the permission of RBI was taken under Section 14 of BR Act or not and as to whether any competent forum has declared such Banks or other financial institutions as secured creditors not. Therefore, no concluding observations deserve to be made on the said aspect, except observing that it is only when the status as that of the secured creditor is proved or found proved, the claim may be considered, failing which such claim fall would in the category of unsecured creditor. Of course, even if the status of secured creditor is found proved, then also it will be to the extent of debt or the security available, whichever is less. For the remaining amount after exhausting security, the claim would stand as unsecured debt . 24. If the facts of the present case are examined in light of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reby they have been directed to pay the unpaid amount to the depositors instead of paying the same to the Corporation. 20. The object with which the Act has been enacted has been stated hereinabove in a nutshell. The object was to insure the depositors so that they may not have to stand in a queue before the Official Liquidator for every paisa deposited by them with the concerned bank. As on today, as per the provisions of Section 16(1) of the Act, a sum of Rs.1 lakh is being insured or guaranteed in respect of each depositor. So a depositor is safe and he has not to wash his hands off his deposit if the amount deposited by him is less than Rs.1 lakh. The Official Liquidator, as per the provisions of the Act, has to give details about the depositors and the amount deposited by them in a prescribed form within three months from the date on which the liquidation order is passed or from the day on which he takes charge, whichever is later and within two months from the date on which the details are submitted to the Corporation, the Corporation has to make payment to the above extent either to the depositors directly or to them through the Official Liquidator. 21. Thu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vocal terms, directs the Official Liquidator to make the payment to the Corporation as it has been stated in the said subsection, notwithstanding anything to the contrary contained in any other law for the time being in force. Thus, the Official Liquidator, as per clause 2 (a) of Section 21 of the Act, has to repay the amount to the Corporation. 25. The aforestated Section 21 not only makes it obligatory on the part of the Official Liquidator to repay the said amount to the Corporation, but it also clarifies that there shall not be any other preferential creditor who would be getting any amount from the Official Liquidator till the amount payable under Section 21 of the Act is paid to the Corporation. 26. In view of the aforestated clear legal position, in our opinion, the High Court was not right when it directed the Official Liquidator to determine the mode of payment by ignoring the aforestated statutory provision. 27. The Corporation was not represented before the learned Single Judge, but at least before the Division Bench, the learned counsel appearing for the Official Liquidator had drawn attention of the Bench to the aforestated legal provisions o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t payment in excess of Rs.1 lakh by ignoring statutory provisions of the Act and the Regulations made thereunder. 31. For the aforestated reason, we are of the view that the High Court had exceeded its authority while giving a direction to the Official Liquidator, which is not in consonance with the statutory provisions and therefore, we set aside the judgment and order delivered by the learned Single Judge as also by the Division Bench and direct the Official Liquidator and the Special Officer to act in accordance with the statutory provisions." 8. Before the Hon'ble Supreme Court, DICGC challenged the order passed by the learned Single Judge as well as Division Bench of the High Court. The learned Single Judge of the High Court directed the liquidator to make the payment of the respective depositors ignoring the claim of the DICGC and/or prior to any amount is paid to the DICGC, the order passed by the learned Single Judge came to be confirmed by the Division Bench, which gave rise to the appeal (s) before the Hon'ble Supreme Court and in the aforesaid appeals, it is observed and held as above. 9. Considering the aforesaid decision of the Hon....