Holding

The Court held that the direction to involve the CBI in identifying innocent cooperative societies does not apply to Indian Bank; the bank must on its own identify and inform innocent societies and may release matured FDR amounts, subject to any disputes.

Summary

The Supreme Court was asked to clarify certain directions given in its 16 May 2008 judgment concerning the Indian Bank scam involving cooperative societies' fixed deposits (FDRs). The Court observed that, unlike the Bank of Baroda case, there was no Central Bureau of Investigation (CBI) probe in the Indian Bank matters. Consequently, the direction that the bank, with CBI assistance, should identify cooperative societies not involved in the scam does not apply to Indian Bank. The Court directed Indian Bank to independently ascertain which societies are innocent, inform them of the maturity of their FDRs, and, where no dispute exists, allow them to obtain loans against those deposits. If disputes arise, the parties may seek adjudication in the appropriate forum. The clarification does not affect other directions of the 2008 judgment. The applications for clarification were allowed and the bank was ordered to pay costs of Rs.20,000.

Issues considered

The applicability of the para 20 direction of the 2008 judgment, which mandates CBI assistance, to the Indian Bank case where no CBI investigation exists.
Whether Indian Bank must release matured FDR amounts to cooperative societies that are not implicated in any scam.
Whether the Supreme Court can modify its earlier directions without setting a precedent.
Whether costs may be imposed on Indian Bank for its conduct.

Legislation cited

Banking Regulations Act, 1949s. 35A
Constitution of Indias. Article 12

Subjects

Fixed DepositsCooperative SocietiesBanking ScamCBISupreme Court clarificationArticle 12Banking Regulations ActLoan facilitiesCivil litigationCriminal investigation

Judgment

[2009] 4 S. C.R. 1036

,.,..
A INDIAN BANK '1'
v
GODHARA NAGRIK COOP CREDIT SOCIETY LTD. &
ANR. ETC. ETC.
I.A. No. 1 In Civil Appeal No. 3303 of 2005
B
MARCH 24, 2009
( S.B. SINHA AND LOKESHWAR SINGH PANTA, JJ ) A.

~
BANKS/BANKING:

c Indian Bank - Scam pertaining to FDs of Co-operative
Societies/Cooperative Banks - Directions given by Supreme
Court in its judgment dated 16.5.2008* - Clarification of -
HELD: Direction contained in Para 20 of the judgment to the
extent that 'the bank with the assistance of Officer of the Central
D Bureau of Investigation should make all attempts to ascertain -+ ..
as to which of the cooperative societies and cooperative banks
are in no way involved in the scam', shall not apply to the cases
of Indian Bank - Indian Bank, however, in the interest of
cooperative societies whose FDRs are lying in deposits and
who have availed the loan facilities, shall on its own identify
E

-
and ascertain the societies that are not involved in any CBI
investigation/case and on such ascertainment and verification,
~
the cooperative societies-depositors shall be informed
regarding the maturity of their FDRs - If the maturity amounts
of the FDRs are adjusted against the loan amount advanced
F to the cooperative societies and if there exists any dispute
between the depositor-societies and Indian Bank about the
recovery or payment of the money, the aggrieved party can
get its claim adjudicated through appropriate proceedings
before the appropriate forum as permissible under law- If there
G is no dispute in regard to the payment of amount of matured
+
FDRs, Indian Bank shall not debar or preclude the innocent
cooperative societies-depositors from taking loan against
FDRs being deposited with the Bank - It is made clear that
the judgment dated 16. 05. 2008 shall stand clarified to the
H 1036
INDIAN BANK V. GODHARA NAGRIK COOP 1037
CREDIT SOCIETY LTD. & ANR. ETC. ETC .
... \ extent it pertains to the cases of Indian Bank- This clarification A
will however, not dilute or affect other directions issued in the
final judgment.
*Indian Bank Vs. Godhara Nagrik Coop Credit Society
=
Ltd. & Anr. Etc. etc.2008 (9) SCR 450 2008 (7) SCALE 363 B
- clarified.

......, Case Law Reference
1-
2008 (9) SCR 450 clarified para 3

CIVIL APPELLATE JURISDICTION : I. A. No. 1 In Civil c
Appeal No. 3303 of 2005
From the Judgement and Order dated 01.10.2003 of the
High Court of Gujarat at Ahmedabad in Letters Patent Appeal
. ~ ,,._ No. 258 of 2000 . D
WITH
I. A. No. 1 In Civil Appeal No. 3336 of 2005
I. A. No. 1 In Civil Appeal No. 3337 of 2005
E
I. A. No. 1 In Civil Appeal No. 3338 of 2005
-~

' Ajay Kumar, Anuradha Dubey Mishra, Vikram, Himanshu
Munshi, Pramod B. Agarwala, Praveena Gautam, for the
Appellant.
F
K. Radhakrishnan, Aniruddha P. Mayee, K.S. Rathod,
Sanjeev Kumar Choudhary, Navin Prakash, A Deb Kumar, B.V.
Balaram, for the Respondents.

'
The order of the Court was delivered :
-+ G
1] Indian Bank has filed these applications praying for
clarification of certain directions contained in the final judgment
dated 16.05.2008 of this Court in Civil Appeal. No. 3303/2005
along with Civil Appeal Nos. 3336, 3337, 3338 and 3304-3335
of 2005. H
1038 SUPREME COURT REPORTS [2009] 4 S.C.R.

A 2.1] Respondents herein are cooperative societies
registered under the Cooperative Societies Act. They
deposited certain amounts in cash in fixed deposits of Banks
wherefor Fixed Deposit Receipts (FDRs) were to be issued.
Such deposits were made through some so-called Commission
B Agents of the Banks on payment of huge commission which is
ordinarily not allowed by the Nationalized Banks.
2.2] Applications for grant of loans by various persons were
filed before the prescribed authorities of the banks on the basis
of the said FDRs. Allegedly a large number of officers of the
C banks were involved in a scam whereby unofficial investments
of the said amount were being made.
2.3] As and when the FDRs matured, the investors
requested the Banks for their encashment. The banks refused
to accede thereto stating that the amount under the FDRs had
D already been paid by way of loans and, thus, no further amount
was payable. It was contended that a fraud on the banks has
been practiced to which the depositors and the officers of the
banks were parties.
E 2.4] Writ petitions were filed. A learned Single Judge of
the High Court opined that serious disputed questions of fact
being involved in the said writ petitions, no relief can be granted
to the writ petitioners.
2.5] Despite the same, the learned single judge relying on
F the provisions contained in Section 35A of the Banking
Regulations Act, 1949 directed constitution of a Committee
under the Chairmanship of the Deputy Governor of Reserve
Bank of India or his nominee to go into the matter in great details.
Various powers were delegated in favour of the Committee
t •
G including the one that the decision of the Committee shall be
final and binding upon the parties.
2.5.1] A Division Bench of the said Court in an intra court
appeal preferred thereagainst, however, stayed only the
operation of some of the clauses of the said order. The
H Committee, however, was allowed to function.
INDIAN BANK V GODHARA NAGRIK COOP 1039
CREDIT SOCIETY LTD. & ANR ETC. ETC.
"\ 2.5.2] A special leave petition filed thereagainst has been A
dismissed by this Court with certain observations.

2.6] The Committee submitted its report. It was found that
principally the officers of the banks were involved in the matter
of commission of the alleged fraud on the Banks.
B
2.6.1] Members of the Committee, however, differed in
their opinion as to whether, having regard to the limited scope
of the enquiry, any positive direction could be issued.

2.7] Relying on the report of the Committee, the Division
Bench of the High Court opined that as the writ petitioners were
c
not parties to the fraud, subject to any other or further orders
thatmay be passed in the criminal case, appellant-banks should
be directed to pay the amounts under the FD Rs to the depositors.
... t- 2.8.1] Appellants filed appeals aggrieved by the said order, D
upon obtaining special leave thereof.
2.8.2] On 5th April 2004, a limited notice was issued by
this Court, which is to the following effect:-

"Issue notice on the special leave petition limited to the
E
question as to whether the High Court should have directed
payment having regard to the fact that the Committee itself
had not finally resolved the question of liability as far as
the disputed amount was concerned.

Issue notice on the prayer for interim relief also." F
2.8.3] This Court in its order dated 10th December, 2004
explained the said order stating:
"The issue which is now required to be resolved is a narrow
' t one viz. whether the Committee had finally decided that G
the amounts payable by the Bank (a) were the liability of
the Bank and (b) if so, what was the quantum if any, payable
by the Bank to the depositors. Learned Counsel appearing
on behalf of the respondent prays for time till after the
vacation. H
1040 SUPREME COURT REPORTS [2009] 4 S.C.R.

A Let the matter appear two weeks after reopening on a -f
miscellaneous day.
There will be interim order staying the operation of the
impugned order."
B 2.8.4] However, by an order dated 9th May, 2005, upon
hearing the counsel for the parties, 'Leave' was granted, as a
result whereof all the contentions of the parties are now open.
3] Having heard the learned counsel for the parties at length
and having noticed and considered the propositions of law
~
c touching the issues involved in these appeals, this Court allowed
the appeals with the following directions [see 2008 (7) SCALE
363 paras 18, 19,20,21,22,& 23 at pgs. 376-377]:-

D
"18. But it is, in our opinion, not a public interest litigation
in that sense of the term. The report, however, was not
unanimous. The opinion of the Committee was a divided
one on the crucial issue. Two members of the Committee
..j

-
were of the opinion that whether the amount deposited by
the cooperative banks was received back by them or not,
was yet to be ascertained. We are, therefore, of the opinion
E
that it cannot be said that the fact finding body, assuming
that the same could be constituted, made such
~
recommendations which could be accepted by the Court
without going into the merit thereof. It is also not a case
where any mandatory relief could be granted in favour of
F
the respondents.
19. Having however said so, we must pose unto ourselves
a further question. Could those cooperative societies which
had absolutely no role to play in the entire episode should
G suffer in any manner whatsoever? The cooperative •
societies/cooperative banks for the purpose of their day-
to-day functioning require the amount which they have
invested in FD Rs on their maturity. Should they wait till the
criminal cases are over? Should they be pushed to institute
civil suits? They can indisputably be compensated by grant
H
INDIAN BANK V. GODHARA NAGRIK COOP 1041
CREDIT SOCIETY LTD. & ANR. ETC. ETC.

'\. of interest. What, however, happens if in the meanwhile in A
the absence of the requisite funds being available to them,
they find it difficult to run the day-to-day affairs?
20. Answers thereto may be difficult to find but it is not a
wholly impossible task. We think that the appellant Bank
B
being a 'State' within the meaning of Article 12 of the
Constitution of India with the assistance of officer(s) of the
...... Central Bureau of Investigation should make all attempts
·r to ascertain as to which of the cooperative societies/
cooperative banks are in no way involved with the scam,
and subject to such precautions as may be found c
necessary to be taken, release the amount in their favour.
21. In any event, the quantum of the amount which all the
depositors would have otherwise received, in the event
-~ their investment in FDRs is found to be genuine, should D
be informed thereabout. Once the liability of the bank is
determined, the bank may invest the said amount in its
own account and issue fresh FDRs therefor. Whereas the
bank may keep the original FDRs with itself, it may issue
the duplicate copies thereof to the eligible cooperative
E
bank. Such an exercise should be completed within a
period of four weeks from date.
22. In the event, the cooperative society intending to avail
loan facilities from the banks for running their business,
may approach them which may apart from usual conditions F
release the same on a further condition that the amount of
FDR would remain with them and on that basis, loans may
be granted of such amount. The usual precautions in regard
thereto may also be taken by the Bank(s).
t
23. We, while saying so, do not intend to lay down any law. G
These directions should not be treated to be precedent.
We are issuing these directions keeping in view that the
factual scenario obtaining in the case and that non-release
of the amount is likely to enure hardships that may be
faced by the cooperative societies. We would also direct H
1042 SUPREME COURT REPORTS [2009] 4 S.C.R.

~

A the criminal court to dispose of the criminal cases pending 'i
before them with utmost expedition. These appeals are
allowed with the aforementioned directions. There shall,
however, be no order as to costs."

4] Applicant-Indian Bank by means of these applications

,.
B
submits that this Court has proceeded on the basis that in the
Indian Bank matters also there was CBI investigation, but in
fact there is no CBI investigation nor there are CBI cases
..__
registered or pending in respect of the Indian Bank matters.
The applicant-Bank has averred that in the absence of any case
c pending against the cooperative societies in the Indian Bank
matters except one where FDRs were lost and police case was
instituted in which the office bearers of the said society was
found to be involved by the police and after filing of the charge

D
sheet, criminal case is pending in the concerned court, there is
no protection of recovery of loan amount by the Indian Bank
~. -
from the societies, who are not involved in the CBI cases. Further,
it is stated that the facts of the cases of Indian Bank and the
Bank of Baroda were not similar and identical. It appears that
in the Bank of Baroda matters some criminal cases/CBI cases
E are pending in which some officers of the Bank of Baroda are
involved in the scam without the fault of the cooperative societies
who should not suffer and should be paid the FDR amount along l
with interest.
5] The applicant-bank next submits that there is no direction
F in the judgment of this Court dated 16.05.2008 that the tainted
societies will have to file civil suit and the FDRs invested as per
the directions of this Court will be subject to the outcome of the
suit. It is also submitted that pursuant to the judgment passed
by this Court the societies involved in the Indian Bank matters ~
G have raised demand notices calling up the banks to make
payment mentioned in the demand notices and if the demand
of the societies is accepted then that would amount to double
payment without there being any protection to the bank. The
applicant-bank also submits that as per its understanding from
H the text of the judgment, the bank should proceed on the basis
INDIAN BANK V. GODHARA NAGRIK COOP 1043
CREDIT SOCIETY LTD. & ANR. ETC. ETC.

that if the tainted societies are innocent and thus to inform them A
. -"\ in regard to the matured amount as on date and then to invest
the said amount in the bank in the form of FD Rs. The fate of the
invested FDR will be subject to the outcome of the criminal cases
as well as civil cases which may be instituted by the societies.
The applicant-Bank is aggrieved against the above extracted B
directions contained in the judgment to the extent that there is
no categorical direction that invested FDR amount will be
,,. subject to civil or criminal cases.

..r 6] On the above-noted premise, the present applications
have been filed seeking clarification of the directions relating to c
the cases of the applicant-Indian Bank.

7] We have heard learned counsel for the parties.

8] In Para 20 of the judgment, the direction that, Banks
..... ~ and CBI shall sit together and identify cooperative societies D
which are in no way involved in scani, has been issued on the
assumption that CBI has investigated matters pertaining to all
cooperative societies and thus innocent societies can be
identified and the amount may be paid to them. The submissions
of the applicant-Indian Bank pleaded in these applications that E
there was no CBI investigation/case pertaining to the matters
of Indian Bank have not been brought to the notice of this Cburt
}
at the time of hearing and disposal of the appeals filed by the
lndi_an Bank. Had the correct statement of facts been pleaded
and contended by the applicant-Indian Bank at the time of F
hearing of its appeals, l..mdisputedly there was no occasion for
this Court to labour hard for issuing such a direction pertaining
to the cases of the cooperative societies-depositors which are
not in any way involved in the scam. Thus, applicant-Indian Bank
... + has misrepresented the facts before this Court at the time of G
hearing of its appeals and now, after realizing its glaring
mistakes, these applications have been filed for seeking
clarification of the directions contained in Paras 20, 21 and 22
of the original judgment.

9] Now, in the background and on reconsideration of the H
1044 SUPREME COURT REPORTS [2009] 4 S.C.R.

A factual situation, the direction contained in Para 20 of the
judgment to the extent that 'the bank with the assistance of
Officer of the Central Bureau of Investigation should make all
attempts to ascertain as to which of the cooperative societies
and cooperative banks are in no way involved in the scam', shall
B not apply to the cases of the Indian Bank. The Indian Bank,
however, in the interest of cooperative societies whose FDRs
are lying in deposits and availed the loan facilities, shall on its
own identify and ascertain the societies who are not involved in
any CBI investigation/case and on such ascertainment and
c verification, the cooperative societies-depositors shall be
informed regarding the maturity of their FDRs. If the maturity
amounts of the FDRs are adjusted against the loan amount
advanced to the cooperative societies and if there exists any
dispute between the depositors societies and the Indian Bank
0 about the recovery or payment of the money, the aggrieved party
can get its claim adjudicated through appropriate proceedings
before the appropriate forum or court as permissible under law.
If there is no dispute in regard to the payment of amount of
matured FD Rs, the Indian Bank shall not debar or preclude the
E innocent cooperative societies-depositors from taking loan
against FDRs being deposited with the Bank.
1OJ We make it clear that the judgment dated 16.05.2008
shall stand clarified to the extent indicated above so far, it
pertains to the cases of Indian Bank. This clarification will
F however, not dilute or affect other directions issued in the final
judgment.
11] In the facts and circumstances of the case for the above-
stated reasons, the applications filed by applicant-Indian Bank
are allowed. However, in view of the conduct of the applicant-
G Indian Bank, it is directed to pay cost of Rs.20,000/- within four
weeks from this order, which shall be deposited in the account
of the Supreme Court Legal Services Authority.

R.P. Appeal allowed.