Supreme Court of India
GOA STATE COOPERATIVE BANK LTD.versusKRISHNA NATH A. (DEAD) THROUGH LRS. AND OTHERS
- Citation
- 2019 INSC 920
- Decided
- 20 August 2019
- Disposal
- Appeal(s) allowed
- Bench
- ARUN MISHRA
Holding
The expiry of the liquidation period under Section 109 does not extinguish members' liability nor bar continuation of recovery proceedings; the Bank may lawfully pursue the pending suits.
Summary
The Goa State Cooperative Bank Ltd., appointed as liquidator of the Goa State Cooperative Fisheries Federation Ltd., filed 156 recovery suits against defaulting members for loans advanced by the Society. While many of these suits were stayed pending appeals, the Society’s winding‑up was deemed terminated after the six‑year period prescribed in Section 109 of the Maharashtra Co‑operative Societies Act, 1960, and the High Court held that the liquidation proceedings were retrospectively closed, barring further recovery. The Bank appealed, contending that the expiry of the liquidation period does not extinguish members’ liability nor the pending recovery actions. The Supreme Court examined the provisions of Sections 102‑110, especially the non‑obstante clause in Section 109(2), and held that the Act does not provide for automatic termination of recovery suits upon liquidation expiry; the members remain liable and the Bank may continue its recovery proceedings. Relying on the principles of restitution and the need to prevent unjust enrichment, the Court set aside the High Court’s order and allowed the appeal, permitting the Bank to pursue the pending recoveries.
Issues considered
- Whether the expiry of the period fixed for liquidation under Section 109 of the Maharashtra Co‑operative Societies Act, 1960, automatically terminates pending recovery proceedings against the Society’s members.
- Whether the Bank, as liquidator, may continue recovery actions against defaulting members despite the termination of the winding‑up proceedings.
Legislation cited
- Maharashtra Co-operative Societies Act, 1960s. 102, s. 103, s. 105, s. 106, s. 107, s. 108, s. 109, s. 110
Subjects
liquidationcooperative societySection 109recovery of duesmember liabilityrestitutionstay of proceedingsbank as liquidator
Judgment
[2019] 10 S.C.R. 721 721
GOA STATE COOPERATIVE BANK LTD. A
v.
KRISHNA NATH A. (DEAD) THROUGH LRS. AND OTHERS
(Civil Appeal No.10596 of 2010)
AUGUST 20, 2019 B
[ARUN MISHRA, S. ABDUL NAZEER AND
M. R. SHAH, JJ.]
Maharashtra Co-operative Societies Act, 1960: s. 109 –
Termination of liquidation proceedings – Expiry of the period fixed C
for liquidation – Effect of, on the proceedings for recovery of dues
instituted/pending as against the members – Held: Concept of
restitution is a remedy against unjust enrichment or unjust benefit –
When there is stay of proceedings by court, no person can be made
to suffer for no fault on his part and a person who has liability but
D
for the interim stay, cannot be permitted to reap the advantages on
the basis of interim orders of the court – Thus, the members who
have obtained stay in appeal or on recovery proceedings or the
case is pending, cannot take advantage of the fact that the period
fixed for Liquidator under the Act is over – Once a report has been
submitted, the Registrar has to take action in terms of the report E
and in such circumstances when the proceedings for recovery are
pending against the members and the Society has taken loan from
the banks for its member, the actual money has to go to the creditor-
bank – In such cases it would be appropriate for the Registrar to
send notice of the proceedings to Banks – On facts, bank itself is a
F
prime lender cum liquidator – Proceedings cannot come to the end
– Thus, it is open to the bank to continue with the recovery
proceedings and make recoveries from the defaulting members –
Merely on the liquidation of Society, or the factum that the period
fixed for liquidation is over, liability of the members for the loans
cannot be said to have been wiped off. G
Allowing the appeal, the Court
HELD: 1.1 The termination of the winding up under section
109 of the Maharashtra Co–operative Societies Act, 1960, cannot
be strictly applied so as to defeat the very purpose of the
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721
722 SUPREME COURT REPORTS [2019] 10 S.C.R.
A legislative intent of recovery of amount. The recovery of public
money from defaulting members is absolutely necessary failing
which huge financial loss would be caused to the appellant–bank.
The interim stay granted by the tribunal cannot come to the
prejudice of the bank. Thus, the provisions of section 109 have
to be construed in such a fashion so as to enable continuance of
B
the proceedings for recovery. As the interim order of the court
cannot work to the prejudice of any of the parties, the provision
of section 109 of the Act should be construed in a manner that it
is not used to interdict recovery from the defaulting members.
[Para 15, 16] [731-E-G]
C 1.2 It is apparent from the facts of the instant case that the
winding up of the Society has been ordered and liquidator has
been appointed as the Society has utterly failed to achieve its
avowed objectives in disbursement of loans to proper persons
and in its recovery. No doubt about it that the liquidation of the
D Society has come to an end after a particular period of time as
fixed under section 109. However, on lapse of time as fixed under
sub–section (1) of section 109 of the Act, proceedings have to be
terminated by the Registrar on receipt of final report from the
liquidator as ordered under section 109(2). However, at the same
time, the Registrar has power to extend the period of 6 years
E fixed under section 109(1), not exceeding one year at a time and
four years in the aggregate, and maximum for 10 years. In case
time is not extended, the winding up comes to an end on the
expiry of 6 years or at the end of the extended period. The total
period can be 10 years. The second proviso to section 109 makes
F it clear that if the Registrar comes to a conclusion that the work
of liquidation could not be completed by the liquidator due to the
reasons beyond his control, he shall call upon the liquidator to
submit his report. After getting the report, if the Registrar is
satisfied that the realisation of assets, properties, sale of properties
still remains to be realised, he shall direct the liquidator to
G complete the entire work and carry out the activities only for the
purposes of winding up and submit his report within such period
not exceeding one year reckoned from the date of receipt of the
report from the liquidator. [Para 17] [731-H; 732-A-D]
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 723
A. (D) THR. LRS.
1.3 Section 109 (2) of the Act contains a non-obstante clause A
which empowers the Registrar to terminate the liquidation
proceedings on receipt of the final report from the liquidator.
The liquidator shall state in the report that the liquidation
proceedings of the society have been closed, and how the winding
up has been conducted and the property and the claims of the
B
society have been disposed of and shall include a statement
showing a summary of the account of the winding up including
the cost of liquidation, the amount, if any, standing to the credit
of the Society in liquidation, after paying off its ‘liabilities’ including
the share or interest of members and suggest how the surplus
should be utilised. [Para 18] [732-E-F] C
1.4 It is apparent that on the termination of the liquidation
proceedings, liability of the members for the debts taken by them
does not come to an end. There is no such provision in the Act
providing once winding up period is over, the liability of the
members for loans obtained by them which is in their hands, and D
for which recovery proceedings are pending shall come to an
end. No automatic termination of recovery proceedings against
the members is contemplated. On the other hand, on completion
of the period fixed to liquidate the society, final report has to be
submitted as to the amount standing to the credit of the society
in liquidation after paying off its liabilities including the share or E
interest of members. Thus, even in the case of liquidation the
accountability remains towards surplus and liabilities do not come
to an end. Even if the period fixed for liquidation of society is
over, that does not terminate the proceedings for recovery which
have been initiated and appeals are pending. [Para 20] [732-H; F
733-A-C]
1.5 The concept of restitution is a common law principle
and it is a remedy against unjust enrichment or unjust benefit. It
is a settled law that when there is stay of proceedings by court,
no person can be made to suffer for no fault on his part and a G
person who has liability but for the interim stay, cannot be
permitted to reap the advantages on the basis of interim orders
of the court. The court cannot be used as a tool by a litigant to
perpetuate illegality. A person who is on the right side of the law,
should not have a feeling that in case he is dragged in litigation,
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724 SUPREME COURT REPORTS [2019] 10 S.C.R.
A and wins, he would turn out to be a loser and wrong–doer as a
real gainer, after 20 or 30 years. Thus, the members who have
obtained stay in appeal or on recovery proceedings or the case is
pending, cannot take advantage of the fact that the period fixed
for Liquidator under the Act is over. [Para 23] [734-C-D]
B Amarjeet Singh v. Devi Ratan (2010) 1 SCC 417 : [2009]
15 SCR 1010 ; South Eastern Coalfields Ltd. v. State
of M.P. (2003) 8 SCC 648 : [2003] 4 Suppl. SCR 651
– referred to.
1.6 Once a report has been submitted, the Registrar has to
C take action in terms of the report and in such circumstances when
the proceedings for recovery are pending against the members
and the Society has taken loan from the banks for its member,
the actual money has to go to the creditor i.e., to the bank who is
going to be benefitted by recovery of public money in the hands
of members. In such cases it would be appropriate for the
D Registrar to send notice of the proceedings to a person who is to
be benefitted from the recovery. In the instant case, the bank
itself is a prime lender cum liquidator. The proceedings cannot
come to the end. Thus, it is open to the bank to continue with the
recovery proceedings and make recoveries from the defaulting
E members. Merely on the liquidation of Society, or the factum that
the period fixed for liquidation is over, liability of the members
for the loans cannot be said to have been wiped off. The
disbursement of loan in an arbitrary manner and failure to recover
was the very fulcrum on the basis of which winding up of the
Society was ordered. [Para 24] [734-E-G]
F
1.7 The decision of the High Court being to the contrary, is
set aside. Though the Liquidator cannot continue once the
proceedings are over. Notice in such cases should be issued by
the Registrar to the creditors and to persons for whose benefit
recovery is to be made, to continue the pending proceedings in
G the instrumentality of court/tribunals/recovery officers etc.
Appellant Bank can continue the pending proceedings. [Para 25]
[735-A-B]
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 725
A. (D) THR. LRS.
Case Law Reference A
[2009] 15 SCR 1010 referred to. Para 21
[2003] 4 Suppl. SCR 651 referred to. Para 22
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 10596
of 2010. B
From the Judgment and Order dated 29.11.2006 of the High Court
of Bombay at Goa in Writ Petition No. 358 of 2001.
Arvind Sharma, Aniteja Sharma, Saurabh Mishra, Abhishek Singh,
Arun Verma, Onkar Singh, Advs. for the Appellant.
C
Ms. Shobha Gupta, Bony Mehra, Ms. A. Subhashini, Advs. for
the Respondents.
The Judgment of the Court was delivered by
ARUN MISHRA, J.
1. The question involved in the present matter is whether under D
the provisions of Section 109 of the Maharashtra Co-operative Societies
Act, 1960 (hereinafter referred to as ‘the Act’) on expiry of the period
fixed for liquidation, the proceedings for recovery of dues instituted/
pending as against the members, shall stand closed.
2. Goa, Daman and Diu Cooperative Fisheries Federation Limited E
(hereinafter referred to as ‘the Society’) was registered under the Act
as it is applicable to Goa. The main objective of the Society was to
promote fisheries and improve socio-economic condition of the fishermen
by providing necessary financial assistance, in order to enable them to
procure mechanized fishing boats/trawlers. During the period from 1974 F
to 1980, the Society advanced loans to its members to the extent of
Rs.316 lacs to purchase engines/hull, winches, nets, etc. by raising loan
from the Goa State Cooperative Bank Limited.
3. While granting loan to its members, serious irregularities were
committed by the Board of Directors of the Society. Due to which, G
Registrar of Cooperative Societies filed Misfeasance Case No.4/1/80.
4. On the basis of enquiry conducted under Section 83(1) of the
Act and in view of the report dated 1.8.1980, the Registrar of Cooperative
Societies, Goa passed an interim order on 23.8.1985 under Section
102(1)(a) of the Act for winding up of the Society. The Registrar of the
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726 SUPREME COURT REPORTS [2019] 10 S.C.R.
A Cooperative Societies confirmed the order, in exercise of power under
Section 102(2), on 24.1.1986 and appointed Additional Collector of Goa
as Liquidator, who continued till 9.12.1991. As liquidation proceedings
were not completed, the Registrar on 10.12.1991 appointed Mr. B.N.
Pathan, Assistant Registrar of the Cooperative Societies as Liquidator,
who continued till 28.2.1992. Yet another Liquidator was appointed by
B
the Registrar on 21.2.1992, who continued till 15.10.1995. The Registrar
vide order dated 16.10.1995 appointed Goa State Cooperative Bank as
Liquidator in order to ensure speedy recovery of loans from the members
of the Society.
5. The Bank in the capacity of Liquidator filed 156 recovery cases
C against the defaulting members of the Society, to whom the loans were
advanced. The amount of outstanding was reduced to Rs.56 lacs towards
principal and Rs.154 lacs towards interest. Out of 156 cases filed against
the defaulting members, 99 appeals were preferred to the Cooperative
Tribunal, which were pending adjudication. The recovery could not be
D completed in view of the pendency of the appeals, interim stay granted
by courts etc.
6. In the year 2001, one of the defaulting members of the Society
filed Writ Petition No.358 of 2001 in the High Court of Bombay at Goa,
prayer was made to declare that the winding up proceedings with respect
E to the Society be deemed to have been terminated with retrospective
effect from 24.1.1993 and for an order restraining respondents continuing
with the winding up/liquidation proceedings in respect of the Society.
7. The High Court allowed the writ petition vide judgment and
order dated 29.11.2006, which has resulted in heavy financial losses to
F the Bank as the cases pending before the Adjudicating Authority will
come to standstill. The High Court vide impugned judgment and order
dated 29.11.2006 held that as per Section 109 of the Act, the winding up
proceedings have to be closed as soon as practicable within six years
from the date the Liquidator takes control of all the property, unless the
period is extended by the Registrar under Section 109. Under Section
G 109(1) of the Act, the Registrar cannot extend the period more than 1
year at a time and 4 years in the aggregate and after the expiry of three
years from the date on which the Liquidator took control, it will be deemed
that liquidation proceedings have been terminated and therefore, there is
no choice left with the Registrar, but to obtain a final report from the
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 727
A. (D) THR. LRS. [ARUN MISHRA, J.]
Liquidator. The High Court has directed the Registrar to examine the A
report submitted by the Bank and take appropriate steps according to
law. The High Court has held that Registrar has to close the winding up
proceedings as a period of 7 years has lapsed and there is no provision
under the law to continue with the winding up proceedings. Therefore,
the writ petition was allowed and it has been declared that the winding
B
up proceedings in respect of the Society are deemed to have been
terminated with retrospective effect from 24.1.1993. The Registrar and
the Liquidator have been restrained from continuing with the winding
up/liquidation proceedings in respect of the Society.
8. Mr. Arvind Sharma, learned counsel appearing on behalf of
appellant-Bank has submitted that the High Court has erred in law in C
allowing the writ petition even after lapse of the period fixed under Section
109 of the Act, the proceedings for recovery of loan amount from
members have to be continued. Ms. Shobha Gupta, learned counsel
appearing on behalf of LRs. of respondent no.1, has submitted that no
case for interference with the impugned judgment and order is made out D
and has taken us to the scheme of the Act to take-home the submission.
9. Where we consider the provisions in the Act, it is apparent that
under Section 102 of the Act, the Registrar is empowered to pass an
interim order directing winding up. The same shall be communicated to
the Society and thereupon Registrar may pass final order, vacating or E
confirming the interim order. When Registrar has passed interim order
or final order under Section 102, the Registrar is empowered under Section
103 to appoint a person as Liquidator and thereupon as provided under
Section 103(2), the society shall hand over the custody and control of all
the property, effects and actionable claims including books, records and
other documents. After final order is passed confirming the interim F
order of winding up, the officers of the society shall vacate their offices
as provided in Section 103(3). As per the provisions of Section 103(4),
the Liquidator, subject to the general control of the Registrar, exercise
all or any of the powers mentioned in Section 105 of the Act and the
Registrar is empowered to remove the Liquidator and appoint another G
without assigning any reason. It is provided under Section 103(5) that
the assets of the society shall vest in the Liquidator. Section 103(6)
makes a provision that in case interim order is vacated, the person
appointed as Liquidator shall hand over the property to the officers who
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728 SUPREME COURT REPORTS [2019] 10 S.C.R.
A had delivered the same to him and the officers of the society shall be
bound by the action taken by the Liquidator.
10. Under Section 105, the Liquidator appointed under Section
103 shall have power subject to supervision and control of the Registrar
to institute and defend legal proceedings, civil or criminal on behalf of
B the society; carry on business of the society; to sell the immovable and
movable property and actionable claims of the society by public auction
or private contract, with any person or body corporate, or sell the same
in parcels. Section 106 deals with the effect of order of winding up.
The order shall be effective and operative in favour of all the creditors
and the “contributories” of the society. When a winding up order becomes
C effective, the Liquidator shall proceed to realise the assets of the society
by sale or otherwise, and no fresh dispute shall be commenced or, if
pending at the date of the winding up order, shall be proceeded with,
against the society, except by leave of the Registrar on such terms as
may be imposed by the Registrar. The Registrar, may on his own motion,
D however, entertain or dispose of any dispute by or against the society.
The provisions contained in Section 107 bars the civil court to take
cognizance of any matter connected with the winding up or dissolution
of a society under the Act. Under Section 108, the Liquidator’s accounts
can be audited and Liquidator has to furnish the Registrar such vouchers
and information as may be required. The Liquidator shall cause a
E summary of audited accounts to be prepared and send a copy of such
summary to every contributory as provided under Section 108(2).
11. Section 109 provides for termination of liquidation proceedings.
The provisions contained in Section 109 reads as under:
F “109. Termination of liquidation proceedings
(1) The winding up proceedings of a society shall be closed as
soon as practicable within six years from the date the Liquidator
takes over the custody or control of all the property, effects and
actionable claims to which the society is or appears to be entitled
G and of all books, records and other documents pertaining to the
business of the society, under sub-section (2) of section 103, unless
the period is extended by the Registrar:
Provided that, the Registrar shall not grant any extension for a
period exceeding one year at a time and four years in the aggregate,
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 729
A. (D) THR. LRS. [ARUN MISHRA, J.]
and shall, immediately after the expiry of ten years from the date A
aforesaid, deem that the liquidation proceedings have been
terminated, and pass an order terminating the liquidation
proceedings.
Provided further that, if, due to termination of liquidation
proceedings at the end of ten years, the Registrar comes to a B
conclusion that, the work of liquidation under Section 105 could
not be completed by the liquidator due to the reasons beyond his
control, he shall call upon the liquidator to submit the report. After
getting the report, if the Registrar is satisfied that the realisation
of assets, properties, sale of properties still remained to be realised,
he shall direct the liquidator to complete the entire work and carry C
out the activities only for the purposes of winding up and submit
his report within such period not exceeding one year reckoned
from the date of receipt of report from the liquidator.
Explanation.— In the case of a society which is under liquidation
at the commencement of the Maharashtra Co-operative Societies D
(Second Amendment) Act, 1985 the period of six years shall be
deemed to have commenced from the date on which the Liquidator
took over the custody or control as aforesaid.
(2) Notwithstanding anything contained in the foregoing sub-section,
the Registrar shall terminate the liquidation proceedings on receipt E
of the final report from the Liquidator. The final report of’ the
Liquidator shall state that the liquidation proceedings of the society
have been closed, and how the winding up has been conducted
and the property of and the claims of the society have been
disposed of, and shall include a statement showing a summary of F
the account of the winding up including the cost of 1iquidation, the
amount (if any), standing to the credit of the society in liquidation,
after paying of its liabilities including the share or interest of
members and suggest how the surplus should be utilised.
(3) The Registrar, on receipt of the final report from the Liquidator, G
shall direct the Liquidator to convene a general meeting of the
members of the society for recording his final report.”
It is provided in sub-Section (1) of Section 109 that proceedings
for liquidation have to be completed within 6 years. The Registrar is
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730 SUPREME COURT REPORTS [2019] 10 S.C.R.
A empowered to grant extension for a period not exceeding 1 years at a
time and 4 years in the aggregate and after expiry of 10 years, the
liquidation proceedings shall be deemed to have been terminated. Sub-
section (1) of Section 109 makes it clear that if due to termination of
liquidation proceedings at the end of 10 years, the Registrar comes to a
conclusion that the work of liquidation under Section 105 could not be
B
completed by the liquidator, due to reasons beyond his control, he shall
call upon the liquidator to submit the report. After getting the report, if
the Registrar is satisfied that the realisation of assets, properties and
sale of properties still remained to be achieved, he shall direct the liquidator
to complete the entire work and carry out the activities only for the
C purposes of winding up and submit his report within such period not
exceeding one year.
12. Section 109(2) of the Act contains non-obstante clause that
the Registrar has to terminate liquidation proceedings on receipt of the
final report of the Liquidator. The final report shall state closure of the
D liquidation proceedings and how the winding up has been conducted.
The final report shall also contain, inter alia, summary of account of the
winding up including the cost of liquidation, the amount (if any) standing
to the credit of the society in liquidation ‘after paying off its liability’
including the share or interest of the members and suggest how the
surplus should be utilised. The liability of Society has also to be
E considered.
13. It is provided under Section 109(3) that Registrar on receipt
of the final report of the Liquidator, shall convene a general meeting of
the members of the society for recording his final report. Section 110 of
the Act provides for the disposal of the surplus assets as shown in the
F final report of the Liquidator, which may be divided by the Registrar
with the previous sanction of the State Government, amongst its members
in such manner as may be prescribed for the purposes. Where the
surplus is not so divided, surplus shall vest in the Registrar.
14. It is apparent from the facts of the case that the wound-up
G Society has availed of loans from Goa State Cooperative Bank Ltd. as
well as from the Agricultural Refinance Development Corporation. From
1974-75 to 1979-80, the Society has advanced total loans of Rs.323.81
lakhs to 155 members. The Society failed to perform its functions. There
was non-recovery of loans from the members resulting in overdues,
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 731
A. (D) THR. LRS. [ARUN MISHRA, J.]
failure to collect the margin money from the loanees prior to release of A
the loans. There were irregularities in sanction of the loans resulting in
benami transactions. Loans were advanced to non-traditional fishermen.
There was mismanagement in the running of the ice factory and diesel
outlet. There was failure to strengthen the affiliated primary fisheries
Cooperative Society. Thus, the winding up of the cooperative society
B
was ordered by the Registrar of Cooperative Societies.
15. The Society and the liquidator had filed recovery cases against
all the defaulting members of the society to whom loans were advanced.
The bank in total advanced Rs.250 lakhs to the society and on taking
charge by the Bank as liquidator of the said society, the bank had
outstanding of Rs.241 lakhs as principal amount and Rs.233 lakhs towards C
interest. The arrears due to the efforts of the liquidator bank were reduced
to Rs.37 lakhs towards principal and Rs.154 lakhs towards interest. It is
pertinent to mention that the bank has further pointed out that out of the
cases filed against the defaulting members, in 42 cases appeals had
been filed before the Cooperative Tribunal wherein stay orders were D
granted. It is also pointed out that 80 cases were pending with the Zonal
Recovery Offices, i.e., Assistant Registrar, Cooperative Society’s Sales
and Recovery Officer under section 156 of the Act. Therefore, the
termination of the winding up under section 109 of the Act, cannot be
strictly applied so as to defeat the very purpose of the legislative intent
of recovery of amount. E
16. It is also submitted that by lapse of time under section 109(1)
of the Act, recovery proceedings cannot come to an end. It is further
pointed out that the recovery of public money from defaulting members
is absolutely necessary failing which huge financial loss would be caused
to the appellant-bank. The interim stay granted by the tribunal cannot F
come to the prejudice of the bank. Thus, the provisions of Section 109
have to be construed in such a fashion so as to enable continuance of
the proceedings for recovery. As the interim order of the court cannot
work to the prejudice of any of the parties, the provision of section 109
of the Act should be construed in a manner that it is not used to interdict G
recovery from the defaulting members.
17. It is apparent from the facts of the instant case that the winding
up of the Society has been ordered and liquidator has been appointed as
the Society has utterly failed to achieve its avowed objectives in
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732 SUPREME COURT REPORTS [2019] 10 S.C.R.
A disbursement of loans to proper persons and in its recovery. No doubt
about it that the liquidation of the Society has come to an end after a
particular period of time as fixed under section 109. However, on lapse
of time as fixed under sub-section (1) of section 109 of the Act,
proceedings have to be terminated by the Registrar on receipt of final
report from the liquidator as ordered under section 109(2). However, at
B
the same time, the Registrar has power to extend the period of 6 years
fixed under section 109(1), not exceeding one year at a time and four
years in the aggregate, and maximum for 10 years. In case time is not
extended, the winding up comes to an end on the expiry of 6 years or at
the end of the extended period. The total period can be 10 years. The
C second proviso to section 109 makes it clear that if the Registrar comes
to a conclusion that the work of liquidation could not be completed by
the liquidator due to the reasons beyond his control, he shall call upon the
liquidator to submit his report. After getting the report, if the Registrar is
satisfied that the realisation of assets, properties, sale of properties still
remains to be realised, he shall direct the liquidator to complete the entire
D
work and carry out the activities only for the purposes of winding up and
submit his report within such period not exceeding one year reckoned
from the date of receipt of the report from the liquidator.
18. Section 109(2) of the Act contains a non-obstante clause which
empowers the Registrar to terminate the liquidation proceedings on receipt
E of the final report from the liquidator. The liquidator shall state in the
report that the liquidation proceedings of the society have been closed,
and how the winding up has been conducted and the property and the
claims of the society have been disposed of and shall include a statement
showing a summary of the account of the winding up including the cost
F of liquidation, the amount, if any, standing to the credit of the Society in
liquidation, after paying off its ‘liabilities’ including the share or interest
of members and suggest how the surplus should be utilised.
19. Section 110 of the Act deals with disposal of surplus assets.
They should either be divided by the Registrar, with the previous sanction
G of the State Government, amongst its members, if they specify that such
a surplus shall be utilised for the particular purpose or may be utilised for
both the purposes.
20. It is apparent that on the termination of the liquidation
proceedings, liability of the members for the debts taken by them does
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 733
A. (D) THR. LRS. [ARUN MISHRA, J.]
not come to an end. There is no such provision in the Act providing once A
winding up period is over, the liability of the members for loans obtained
by them which is in their hands, and for which recovery proceedings are
pending shall come to an end. No automatic termination of recovery
proceedings against the members is contemplated. On the other hand,
on completion of the period fixed to liquidate the society, final report has
B
to be submitted as to the amount standing to the credit of the society in
liquidation after paying off its liabilities including the share or interest of
members. Thus, even in the case of liquidation the accountability remains
towards surplus and liabilities do not come to an end. Even if the period
fixed for liquidation of society is over, that does not terminate the
proceedings for recovery which have been initiated and appeals are C
pending.
21. It is a settled law that when there is stay of proceedings by
court, no person can be made to suffer for no fault on his part and a
person who has liability but for the interim stay, cannot be permitted to
reap the advantages on the basis of interim orders of the court. In D
Amarjeet Singh v. Devi Ratan, (2010) 1 SCC 417, it was held that no
person can suffer from the act of court and unfair advantage gained by
a party of interim order must be neutralised. The Court should never
permit a litigant to perpetuate illegality by abusing the legal process. It is
the bounden duty of the court to ensure that dishonesty and any attempt
to abuse the legal process must be effectively curbed and the court must E
ensure that there is no wrongful, unauthorised or unjust gain for anyone
by the abuse of process of the court. No one should be allowed to use
the judicial process for earning undeserved gains or unjust profits. The
object and true meaning of the concept of restitution cannot be achieved
unless the courts adopt a pragmatic approach in dealing with the cases. F
The Court observed:
“18. In Ram Krishna Verma v. State of U.P. (1992) 2 SCC 620,
this Court examined the similar issue while placing reliance upon
its earlier judgment in Grindlays Bank Ltd. v. ITO, (1980) 2 SCC
191 and held that no person can suffer from the act of the court G
and in case an interim order has been passed and the petitioner
takes advantage thereof and ultimately the petition is found
to be without any merit and is dismissed, the interest of justice
requires that any undeserved or unfair advantage gained by
H
734 SUPREME COURT REPORTS [2019] 10 S.C.R.
A a party invoking the jurisdiction of the court must be
neutralised.”
(emphasis supplied)
22. The principle of restitution enjoins a duty upon the courts to do
complete justice to the party at the time of final decision, and to do away
B with the effect of interim order in the fact situation of the case. In South
Eastern Coalfields Ltd. v. State of M.P., (2003) 8 SCC 648, it was
observed that no party can take advantage of litigation, it has to disgorge
the advantage gained due to delay, in case lis is lost.
23. The concept of restitution is a common law principle and it is
C a remedy against unjust enrichment or unjust benefit. The court cannot
be used as a tool by a litigant to perpetuate illegality. A person who is on
the right side of the law, should not have a feeling that in case he is
dragged in litigation, and wins, he would turn out to be a loser and wrong-
doer as a real gainer, after 20 or 30 years. Thus, the members who have
D obtained stay in appeal or on recovery proceedings or the case is pending,
cannot take advantage of the fact that the period fixed for Liquidator
under the Act is over.
24. Once a report has been submitted, the Registrar has to take
action in terms of the report and in such circumstances when the
E proceedings for recovery are pending against the members and the Society
has taken loan from the banks for its member, the actual money has to
go to the creditor i.e., to the bank who is going to be benefitted by
recovery of public money in the hands of members. In such cases it
would be appropriate for the Registrar to send notice of the proceedings
to a person who is to be benefitted from the recovery. In the instant
F case, the bank itself is a prime lender cum liquidator. The proceedings
cannot come to the end. Thus, in our considered opinion, it is open to the
bank to continue with the recovery proceedings and make recoveries
from the defaulting members. Merely on the liquidation of Society, or
the factum that the period fixed for liquidation is over, liability of the
G members for the loans cannot be said to have been wiped off. The
disbursement of loan in an arbitrary manner and failure to recover was
the very fulcrum on the basis of which winding up of the Society was
ordered.
H
GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH 735
A. (D) THR. LRS. [ARUN MISHRA, J.]
25. The decision of the High Court to the contrary, deserves to be A
and is hereby set aside. Though the Liquidator cannot continue once the
proceedings are over. Notice in such cases should be issued by the
Registrar to the creditors and to persons for whose benefit recovery is
to be made, to continue the pending proceedings in the instrumentality of
court/tribunals/recovery officers etc. We hold that appellant Bank can
B
continue the pending proceedings. The appeal is allowed to the aforesaid
extent.
Nidhi Jain Appeal allowed.
C
D
E
F
G
H
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