DEPOSIT INSURANCE & CREDIT GUARNT.CORPN. Vs RAGUPATHI RAGAVAN .
Bench: ANIL R. DAVE,DIPAK MISRA
Case number: C.A. No.-001035-001035 / 2008
Diary number: 3675 / 2007
Advocates: H. S. PARIHAR Vs
L. K. PANDEY
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REPORTABLE
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1035 OF 2008
DEPOSIT INSURANCE & CREDIT GUARANTEE CORPORATION ... APPELLANT
VERSUS RAGUPATHI RAGAVAN & ORS. ... RESPONDENTS
WITH
CIVIL APPEAL NOS. 1116, 1923, 1924, 1925, 1926, 1927, 1928, 1929, 1930, 1931, 1932, 1934 AND 1935 OF 2009, CIVIL APPEAL NOS. 5333, 5334, 5335, 5336 AND 5337-5339 OF 2012.
J U D G M E N T
ANIL R. DAVE, J.
1. Judgment dated 20th November, 2006 delivered in
Writ Appeal No.261 of 2006 by the Madurai Bench of
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the Madras High Court has been challenged in the
main appeal. For the sake of convenience, we have
considered facts of the main case for deciding the
common issues which are involved in all these
appeals.
2. The appellant, who has approached this Court,
was not a party to the litigations before the High
Court, but has been constrained to approach this
Court as the direction given by the learned Single
Judge as well as by the Division Bench of the High
Court in the aforestated writ appeal affects the
appellant adversely and therefore, the appellant had
submitted an application for permission to file the
Special Leave Petition against the aforestated
judgment. Permission was granted to the present
appellant and therefore, this appeal.
3. The appellant is Deposit Insurance and Credit
Guarantee Corporation (hereinafter referred to as
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‘the Corporation’). The function of the Corporation
is to insure deposits made by depositors with the
banking companies and the said Corporation has been
constituted under the provisions of Section 3(1) of
the Deposit Insurance and Credit Guarantee
Corporation Act, 1961 (hereinafter referred to as
‘the Act’). The Act had been enacted with a very
laudable purpose. Normally a person deposits his
savings or invests his money by way of a saving bank
account or a fixed deposit with banking companies,
including cooperative banks, without taking much
care of ascertaining financial condition of the
bank, possibly because of the trust reposed by him
in the Reserve Bank of India, which regulates the
banking business in the country.
4. In the event of any financial difficulty faced
by the banking company, the depositors would
generally lose substantial amount of their deposits,
in whichever form made, because normally at the end
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of the winding-up proceedings, the unsecured
creditors get very little amount. So as to
safeguard the interest of such small depositors or
investors, who have parked their funds with banking
companies, the Act had been enacted to insure the
amount deposited by the depositors and to guarantee
repayment of certain amount to such investors, when
the banking company is in financial difficulty and
is ultimately wound-up.
5. In the instant case, we are concerned with
Theni Cooperative Urban Bank Ltd., doing its banking
business mainly in District Theni of Tamil Nadu.
The aforestated Bank, which had been registered as
an insured bank with the Corporation on 1st July,
1980, was in financial difficulties and therefore,
the Reserve Bank of India had cancelled its licence
to do banking business under Section 22 of the
Banking Regulations Act, 1949 on 23rd May, 2002.
However, the said order cancelling the licence was
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kept in abeyance for a period of six months by an
order dated 7th June, 2002.
6. Ultimately, the said bank could not discharge
its obligations and therefore, on 24th December,
2002, the Joint Registrar of the Co-operative
Societies, Theni, was appointed as an Official
Liquidator to carry out liquidation proceedings.
7. As stated hereinabove, the said bank had been
insured with the Corporation and therefore, the
Official Liquidator prepared a claim list of the
depositors etc. as per the provisions of Section 17
of the Act and forwarded the same to the Corporation
on 21st May, 2003.
8. As the Corporation had insured the bank, as per
the provisions of the Act, the Corporation settled
the statutory claims of the depositors by releasing
a sum of Rs.3,26,87,846.12, and thereby maximum
amount payable to each depositor had been paid.
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Thus, the amount which the Corporation was liable to
pay to the depositors under the provisions of
Section 16 of the Act had been paid by the
Corporation through the Official Liquidator.
9. It is pertinent to note that the Corporation
does not insure the entire amount paid by all the
depositors. According to the provisions of Section
16 of the Act, at the relevant time the amount which
was insured in respect of each depositor of the said
bank was Rs.1 lakh and therefore, every depositor
was paid the amount of deposit or a sum of Rs.1
lakh, whichever was less.
10. Though the aforestated amount had been released
by the Corporation, all the depositors could not be
paid the entire amount they had deposited with the
bank because the amount insured in respect of each
depositor was only Rs.1 lakh. So, those who had
deposited more than one lakh rupees with the bank,
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were not paid the amount to the extent to which
their deposits exceeded Rs.1 lakh.
11. In the aforestated background, Writ Petition
Nos.6768 and 7372 of 2005 had been filed in the
Madurai Bench of the Madras High Court by some of
the depositors praying that the amount which had
remained unpaid on their fixed deposits be directed
to be paid to them by the Joint Registrar of the
Co-operative Societies, who had been appointed as
the Official Liquidator. In the said petitions, the
aforestated officer, i.e. the Official Liquidator as
well as the Special Officer, Theni Co-operative
Urban Bank Ltd. were impleaded as respondents.
After hearing the concerned parties, by an order
dated 27th July, 2005, the learned Single Judge was
pleased to direct the Special Officer to pay the
amount deposited by the depositors with accrued
interest thereon within 8 weeks from the date of
receipt of a copy of the said order by the Special
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Officer. Upon perusal of the said order, it appears
that the said petitions had been disposed of at an
admission stage and even before any reply was filed
on behalf of the Official Liquidator.
12. Be that as it may, the said order was
challenged by the respondents by filing Writ Appeal
No.261 of 2006. At the time of hearing of the
appeal, the learned counsel appearing for the
Official Liquidator had submitted before the High
Court that the bank had been ordered to be wound–up
on 24th December, 2002, and an Official Liquidator
had been appointed, who had disbursed the amount
received from the Corporation. It had also been
submitted before the High Court that upon
disbursement of the amount received from the
Corporation, the balance amount at the disposal of
the Official Liquidator was to be refunded to the
Corporation as per the provisions of the Act as the
Corporation had a preference over the claim of the
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depositors, who had already received Rs.1 lakh from
the Corporation. Ultimately, after hearing the
learned counsel, the High Court came to the
conclusion that the Corporation had no preferential
right and the amount which was with the Official
Liquidator should have been distributed among the
depositors. The Official Liquidator as well as the
Special Officer had been directed to carry out the
said instructions within a particular period and
thus the writ appeal had been disposed of.
13. The Corporation was not a party before the High
Court, but the right of the Corporation to get back
the amount in preference over other depositors in
pursuance of the provisions of the Act was adversely
affected by virtue of the impugned judgment and
therefore, the Corporation filed the Special Leave
Petition which has now been converted into this
appeal. These are the circumstances in which this
appeal has been placed before us for hearing.
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14. According to the learned counsel for the
Corporation, the directions given by the learned
Single Judge as well as the Division Bench in appeal
by the High Court are contrary to the provisions of
the Act. The learned counsel had taken us through
the provisions of the Act, more particularly, the
provisions of Sections 16, 17, 21 and 22 and the
provisions of the Banking Regulations Act, 1949, so
as to establish the case of the Corporation to the
effect that after payment by the Corporation to the
depositors to the extent to which the deposits had
been guaranteed, the surplus should be put at the
disposal of the Corporation subject to the provision
of Section 21 of the Act. Till the said surplus is
paid to the Corporation, subject to the provisions
regarding making payment of winding up expenditure,
dividend to be paid as per the provisions of Section
21 of the Act, the depositors could not have been
given any further amount. Any payment to depositors
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at that stage would be contrary to the provisions of
the Act and by virtue of the orders passed by the
High Court, the Official Liquidator was directed to
act contrary to the provisions of the Act.
15. It had been submitted by the learned counsel
that the High Court did not consider any of the
provisions of the Act or the provisions of the
Banking Regulations Act, 1949 before passing the
impugned order. According to him, once each
depositor is paid the amount deposited or Rs.1 lakh,
whichever is less, the Official Liquidator of the
Bank should have given the amount to the Corporation
as per the provisions of Section 21 of the Act. In
view of the aforestated legal position, the High
Court committed an error by giving a direction to
the Official Liquidator that the amount which he
had, should be distributed among the depositors.
Doing so would be absolutely contrary to the Scheme
and spirit of the Act. The learned counsel had
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narrated the object with which the Act had been
enacted and the Corporation had been set-up, which
has been narrated hereinabove.
16. On the other hand, the learned counsel
appearing for the depositors had submitted that it
was the duty of the Official Liquidator to
distribute the amount which he had with him among
the depositors as it is done in
insolvency/winding-up proceedings. According to
him, the Corporation having paid the amount which it
had guaranteed to pay, had no right to get any
amount from the Official Liquidator as the bank had
been paying premium to the Corporation in accordance
with the provisions of the Act and therefore, it was
the duty of the Corporation to disburse the amount
guaranteed among the depositors. After paying the
said amount,
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the Corporation had no right of whatsoever type to
get any amount from the Official Liquidator or the
Special Officer.
17. We have heard the learned counsel at length and
have also considered some judgments referred to by
them and the provisions of the Act and the Banking
Regulations Act, 1949.
18. Upon hearing the learned counsel appearing for
the parties and looking at the facts of the case, we
are of the view that this appeal deserves to be
allowed. We note the fact that Writ Petition
Nos.6768 of 2005 and 7372 of 2005 had been finally
disposed of at an admission stage. In the said
petitions, the present appellant Corporation was not
made a party, though it was stated before the
learned Single Judge that according to the statutory
provisions of the Act, the Official Liquidator had
to make payment to the Corporation. In view of the
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said submission, in our opinion, it would have been
better if the Corporation had been impleaded as one
of the respondents. In that event, the stand of the
Corporation and the provisions of the Act could have
been known in detail by the learned Single Judge.
19. Be that as it may, now we are concerned with a
direction given by the High Court to the Official
Liquidator and the Special Officer of the Bank,
which is in liquidation, whereby 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
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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. Thus, as per the above-referred Scheme, each
depositor, including each original petitioner, must
have received Rs.1 lakh from the Official
Liquidator. Initially, upon the bank being ordered
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to be wound-up, the original petitioners and other
depositors had a right to recover Rs.1 lakh or the
amount deposited, whichever was less, from the
Official Liquidator and the said amount must had
been paid to them when the petitions were filed.
22. According to the provisions of the Act, after
payment to the above extent is made to each
depositor, if any amount is available at the
disposal of the Official Liquidator, which he might
have recovered from the borrowers or from other
sources, he has to pay the said amount to the extent
to which the amount had been paid by the Corporation
as per the provisions of Section 21 of the Act.
Section 21 of the Act reads as under :-
“21. (1) Where any amount has been paid under section 17 or section 18 or any provision therefor has been made under section 20, the Corporation shall furnish to the liquidator or to the insured bank or to the transferee bank, as the case may be, information as regards the amount so paid or provided for.
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2) On receipt of the information under sub-section (1), notwithstanding anything to the contrary contained in any other law for the time being in force, - (a) the liquidator shall, within such time
and in such manner as may be prescribed, repay to the Corporation out of the amount, if any payable by him in respect of any deposit such sum or sums as make up the amount paid or provided for by the Corporation in respect of that deposit;
(b) the insured bank or, as the case may be, the transferee bank, shall, within such time and in such manner as may be prescribed, repay to the Corporation out of the amount, if any, to be paid or credited in respect of any deposit after the date of the coming into force of the scheme referred to in section 18, such sum or sums as make up the amount paid or provided for by the Corporation in respect of that deposit.”
23. It is pertinent to note that when the
Corporation had paid to the depositors as per the
insurance scheme under the Act, the Corporation gets
a right under the aforestated Section 21 of the Act
to get money from the Official Liquidator.
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24. One has to look at sub-Section (2) of Section
21, which in unequivocal terms, directs the Official
Liquidator to make the payment to the Corporation as
it has been stated in the said sub-section,
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.
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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 of the
Act. Moreover, provisions of Regulation 22 of the
Deposit Insurance and Credit Guarantee Corporation
General Regulations, 1961 (hereinafter referred to
as ‘the Regulations’) had also been referred to by
the learned counsel. The said Regulation 22 reads as
under :
“22. The amounts repayable to the Corporation under sub-section (2) of section 21 of the Act shall be paid from time to time by, -
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(a) the liquidator as soon as the realisations and other amounts in his hands, after making provision for expenses payable by that time, are sufficient to enable him to declare a dividend of not less than one paisa. in the Rupee to each depositor.
(b) the insured bank or the transferee bank, as the case may be, as soon as the realisations and other amounts in its hands, after making provision for expenses payable by that time in respect of such realisations or other amounts in its hands are sufficient to enable it after the date of coming into force of the scheme referred to in section 18 of the Act, to pay or credit in respect of each depositor a sum not less than one paisa in the Rupee.”
28. The aforestated Regulation 22 also provides
that the Official Liquidator, after making necessary
provision for the expenses in relation to the
liquidation proceedings and for declaration of
dividend, as prescribed in the Regulations, has to
make payment to the Corporation.
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29. In view of the aforestated statutory legal
provision, in our opinion, the High Court should not
have given the direction which, if complied with,
would run contrary to the statutory provisions
incorporated in the Act.
30. Even if one looks at the entire issue from
different point of view, one would believe that all
the depositors have by and large equal right. If the
amount deposited is less than Rs.1 lakh, each
depositor gets the amount in full, but if the
deposit is exceeding Rs.1 lakh, then only the amount
which is in excess of Rs.1 lakh may not be given to
the depositor, unless the bank in liquidation is
having sufficient funds which can be given to all on
pro-rata basis after providing for expenditure in
the liquidation proceedings and after repaying the
amount to the Corporation as per the provisions of
the Act. The Act in a way guarantees repayment of
Rs.1 lakh to each depositor. The High Court or any
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other authority has no power to direct 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.
32. The appeal is, accordingly, allowed with no
order as to costs.
CIVIL APPEAL NOS.1116, 1923, 1924, 1925, 1926, 1927, 1928, 1929, 1930, 1931, 1932, 1934 AND 1935 OF 2009
33. So far as Appeal No.1116 of 2009 and similar
matters are concerned, we record the fact that they
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have been filed at an interlocutory stage and
therefore, the said appeals are disposed of with a
direction to the High Court to decide the matters,
which are pending before it, in the light of the law
laid down hereinabove.
CIVIL APPEAL NOS.5333, 5334, 5335, 5336 AND 5337-5339 OF 2012
34. In all the aforestated appeals, some compromise
had been arrived at among the parties before the
learned Single Judge, but the same had been
challenged before the Division Bench. The Division
Bench had quashed and set aside the order, whereby
the litigants had entered into a compromise and the
matters had been remanded to the learned Single
Judge. We dismiss the aforestated appeals as the
matters have been remanded to the learned Single
Judge. However, we direct that the present
appellant shall be impleaded as a party-respondent
before the learned Single Judge so that all Writ
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Petitions can be decided afresh after considering
the provisions of the Act and after hearing the
present appellant.
35. The appeals are, thus, disposed of with no
order as to costs.
…………………………………………………….J (ANIL R. DAVE)
…………………………………………………….J (DIPAK MISRA) NEW DELHI; JULY 01, 2015.