Indian Bank Vs. Godhara Nagrik Coop. Credit Soc. Ltd.& ANR. 
INSC 961 (16
REPORTABLE IN THE SUPREME COURT OF
INDIA CIVIL APPELALTE JURISDICTION CIVIL APPEAL NO. 3303 of 2005 Indian Bank
.... Appellant Versus Godhara Nagrik Cooperative Credit Society Ltd. and
another .... Respondents WITH
(C.A. Nos. 3336, 3337, 3338 and 3304-3335 of 2005)
S.B. SINHA, J.
1. These appeals involve an
interesting question as regards the power of judicial review of a Superior
2. Respondents herein are cooperative
societies registered under the Cooperative Societies Act and/or their Members.
2 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 Agents
of the Banks on payment of huge commission which is ordinarily not allowed by
the Nationalized Banks.
3. 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 banks were involved in a scam whereby unofficial investments of
the said amount were being made.
4. 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 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.
5. 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.
6. Despite the same, the learned
single judge relying on 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 including the one that the decision of the Committee shall be
final and binding upon the parties.
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 Committee, however, was
allowed to function.
A special leave petition filed
thereagainst has been dismissed by this Court with certain observations.
7. 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.
4 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.
8. Relying on and/or on the basis
of the report of the Committee, the Division Bench of the High Court opined
that as the writ petitioners were not parties to the fraud, subject to any
other or further orders that may be passed in the criminal case,
appellant-banks should be directed to pay the amounts under the FDRs to the
9. Appellants are, therefore,
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 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."
5 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 one viz. whether the Committee had
finally decided that 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
Learned counsel appearing on
behalf of the respondent prays for time till after the vacation.
Let the matter appear two weeks
after reopening on a miscellaneous day.
There will be interim order
staying the operation of the impugned order."
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.
10. Mr. P.P. Rao, learned Senior
Counsel appearing on behalf of Bank of Baroda would submit :-
In a writ
petition involving private dispute, no direction for payment of money in favour
of the writ petitioners should have been issued by the High Court;
6 As the writ petitions
involved serious disputed questions of fact, the High Court should not have
entertained the same;
regard to the fact that the Central Bureau of Investigation has since submitted
a charge-sheet wherein not only the officers of the banks but also the
commission agents have been found to be guilty of an offence of conspiracy in
committing fraud on the bank, the judgment and direction of the High Court
should be set aside.
Mr. Sundaram, learned Senior
Counsel, appearing on behalf of the respondents, on the other hand, would
writ petitions were filed for enforcement of a contract, as the same involved
public law character, the writ petitions were maintainable.
being `State' within the meaning of Article 12 of the Constitution of India,
they were amenable to writ jurisdiction of the High Court.
7 The writ petitions having
not been dismissed in limine, the High Court was entitled to go into the merit
of the matter for the purpose of arriving at a finding as to whether any case
has been made out for issuance of any writ, direction or order.
In a case of this nature the
High Court is entitled to convert a private dispute into a public interest
litigation, the same having a public ramification by appointing a Committee and
act thereupon, as a consequence whereof, relief in favour of the writ
petitioners/respondents could be granted.
The propositions of law which are
Petitions against the banks being `State' within the meaning of Article 12 of
the Constitution of India were maintainable;
Petitions involving serious disputed questions of fact, ordinarily should not be
entertained although the High Court in some cases may enter into disputed
questions of fact.
8 The question, however, is as to
whether the learned Single Judge, despite holding that the writ petitions were
not maintainable, could have issued direction for constitution of the
The powers and functions delegated
to the Committee were wide, by reason whereof for all intent and purport, even
judicial power were delegated.
Let us now consider the question
as to whether direction to constitute such a Committee was legally permissible.
Indisputably, the authorities of the Reserve Bank of India in exercise of their
statutory powers conferred upon them under Section 35A of the Banking
Regulation Act could issue directions for initiating an enquiry into the
affairs of the Banks. The Banks being public sector undertakings could
themselves do so and have in fact done so.
It is one thing to say that the
Public Sector Banks having regard to the provisions of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 should discharge their
functions keeping in mind the larger public interest but ordinarily in the
matter of enforcement of contract, they are to be governed by the terms
thereof, which would not be 9 amenable to writ jurisdiction of the High Court
unless the actions of the banks are found to be wholly arbitrary and
The core question which arises for
consideration in the writ petitions was as to whether, keeping in view the
apprehension in the mind of the Bank that it has been subjected to fraud by its
own officers as also the apprehension in their mind that the writ petitioners
or their agents might have conspired with the offices of the Banks, was it
unfair and unreasonable in its decision to refuse to make payment? The answer
to that question prima facie must be rendered in the negative. If, however, it
is found as of fact that the writ petitioners-respondents were not parties to
the fraud, whether even in a lis involving private law domain, namely, contract
qua contract, as a trustee of the investors' money, they may be held to be
liable to refund the amount, is the question?.
Indisputably, whether as a public
sector undertakings or otherwise the banks cannot refuse to accede to the just
demand of the investors to pay any amount lawfully due to them inter alia on
the premise that their officers are guilty of commission of any fraud.
10 It is one thing to say that
fraud has been committed by their officers to cause wrongful loss to the bank
but it is another thing to say that the banks are constructively liable for the
acts of their officers.
In given cases, the employors are
constructively liable for acts of negligence on the part of their employees.
The Alter Ego approach adopted in
the theory of Corporate liability which has been applied by the House of Lords
in Lennard's Carrying Co.
Ltd. v.Asiatic Petroleum Co Ltd
 AC 705 HL is one such instance.
The facts of the case concerned a
cargo claim which Lennards sought to defend by contending that Section 502 of
the Merchant Shipping Act 2894 exonerated the owner from losses arising without
his actual fault. The House of Lords held that they could not rely on that
defence since the fault of the appropriate organ such as the Board of Directors
or managing Director could be attributed to the company.
In Farrar's Company Law, 4th Edn.
Page 147, it is stated:
"An employee who acts for the
company in the course of his or her employment will usually bind the company
and his or her knowledge will be attributed to 11 the company because he or she
is the company for the purpose of the transaction in question.
This is so even if the employee is
acting dishonestly or against the interests of the company or contrary to
orders but it is not so where the company is the victimThis is to avoid an
Another instance of the
application of the theory of Corporate Liability is the `Attribution Approach'
as adopted by the Judicial Committee of the Privy Council in Meridian Global
Funds Management Asia Ltd. v.
Securities Commission [ 1995] 2 AC
500,  3 All ER 918.
In that case, two employees of
Meridian, had improperly used their authority to purchase in the name of the
company a substantial interest in Euro-National Corp. Ltd., a New Zealand
listed company. Under the New Zealand Securities Amendment Act 1988, Meridian
was required to give notice of its acquisition to ENC and the Stock exchange.
The two employees knew this but the Board and the managing Director of Meridian
did not. No notice was given. The Privy Council upheld the New Zealand Court's
in decision holding that Meridian had contravened the law, on the 12 premise
that the knowledge of the employee would be attributed to Meridian.
We will, thus, assume for the
purpose of this case that the Banks are constructively liable for acts of their
employees. We will also assume that the Banks are liable to pay the amount
under the contract for which the FDRs were issued.
11. The main question, however,
would still remain as to whether in a case of this nature (which would in turn
depend on the finding of fact) as to whether the petitioners themselves or
their agents being party to the fraud, any direction in the public law domain
can be issued. The larger question would be as to whether the writ petitions
having not been found to be maintainable being purely of private law character,
the High Court could treat it to be one involving a public law domain and could
still have private law remedy available to the writ petitioners? A writ
petition indisputably would be maintainable even in relation to a matter
arising out of contract qua contract.
12. As has been submitted by Mr.
Sundaram that some cases may start on a private interest but if the court finds
involvement of a public law element therein concerning a large number of
people, it may proceed on the basis as if it was a public interest litigation
and appoint a Committee and then grant relief in favour of the writ
petitioners. Whether such an extraordinary case has been made out herein is the
Respondents are cooperative
societies. They at the instance of some agents or the middlemen thought it
expedient to invest in Fixed Deposit Receipts (FDRs) in Bank of Baroda and
Indian Bank. The modus operandi appears to be that the brokers/intermediaries
lured a few cooperative banks/credit societies for placing deposits with the
branches of Bank of Baroda/Indian Bank in and around Surat as also at Bharuch
wherefor a handsome commission/incentive ranging from 3.8 to 25 per cent used
to be given. The Cooperative Societies themselves did not approach the Bank.
All acts were done through the
agents. The documents seem to have been sent through brokers who also delivered
to them the Maturity Value Certificates in lieu of original FDRs or the
FDRs/Xeroxed copies, in addition to delivery of drafts for commission. The
commission used to be paid in cash. In some cases, the original FDRs were
retained by the banks.
However, the original documents
sent by the cooperative societies to the 14 banks in some cases were not
available in the offices of the bank but a different set of documents were
replaced in the files. Loans were raised against FDRs on the basis of such
documents mainly for further investment by private individuals. Funds were
withdrawn in cash either directly from their current accounts or by issuing
cheques in favour of some individuals who reportedly discounted their cheques.
13. The fact that the officers of
the banks were involved in the entire dealings is not in dispute. It is
furthermore not in dispute that some brokers/commission agents were also
involved. To what extent, the authorities of the cooperative banks and/or
cooperative societies were involved and/or in know thereof, however, is not
Respondents - Cooperative
Societies prayed for issuance of a writ of or in the nature of mandamus or any
other appropriate writ, order or direction quashing and/or setting aside the
letter at Annexure A dated 2.4.98 of respondent No. 1. It was furthermore
prayed that the respondent Nos. 1 and 2 be directed to honour the FDRs copies
of which were annexed thereto with the interest accrued thereon and to restrain
the respondent No. 1 to appropriate the proceeds of the said FDR and also be
further directed to 15 honour the FDR with interest accrued thereon on such
terms and conditions which the Hon'ble Court deems fit.
The learned single judge issued
the following directions:
"I. A Committee is hereby
constituted as under:-
Governor of the Reserve Bank of India himself or his nominee as the Chairman of
One member to be nominated by
the Deputy Governor of the Reserve Bank of India who shall be the officer of
the highest rank in the Reserve Bank of India but subordinate to Dy. Governor.
One member from the Bank of Baroda/Indian Bank to be appointed by the Board of
Directors of the concerned Bank preferably a Chief General Manager or an officer
not below the rank of General Manager. The member from Bank of Baroda would
participate in the meeting of this Committee only when the cases relating to the
Bank of Baroda are taken up and the member from the Indian bank shall
participate in the meeting of the Committee only when the cases relating to
Indian Bank are taken up.
Committee may evolve and follow its own procedure and will also have the power
to examine summon or examine the witnesses.
This Committee shall examine
each and every case on its own merits with reference to the records desired to
be made available and will give its findings with regard to the amount due and
payable to the concerned petitioners/parties and the rate of interest. The Bank
of Baroda and 16 Indian Bank shall inform the Committee in writing about the
undisputed amount with full details. This Committee shall also go into
the question of the rate of interest payable in case of the undisputed amount,
which is directed to be paid under this order. It will also be open for the
Committee to opine as to who were the officers/employees/party responsible for
this conspiracy and fraud.
as may be given by the Committee shall be binding on both the sides and shall be
The petitioners/parties on
receipt of any amount as a result of the finding of the Committee as aforesaid,
shall also give an undertaking to the concerned Bank before the amount is
withdrawn, that in case as a result of CBI inquiry, it is found and held by the
concerned Court after the trial that any amount had been withdrawn by any such
party, as a part of the aforesaid conspiracy, etc. they will return such amount to
the concerned Bank.
The Committee shall decide
all these cases within a period of three months from the date the certified
copy of this order is produced before the Dy. Governor of the Reserve Bank of
It will be
open for the petitioners/parties to agitate their grievance, if any, against the
orders which may be passed as a result of the findings of the Committee
constituted under this Court's order as aforesaid.
directions are in addition to and not in derogation of any legal remedy, which
any party may seek after the report of this Committee.
17 For the time being, the
concerned Banks, i.e. Bank of Baroda/Indian Bank shall disburse the undisputed
amount, if any, with interest at the rate of Savings Bank Account to the
respective petitioners/parties within 15 days from the date the copy of this
order is produced before the concerned Bank. The payment shall be made through
Demand Drafts in the name of the petitioners Societies/Banks/Depositors.
However, if the Committee decides any rate of interest higher than the Savings
bank Account, the consequences shall follow."
The learned single judge opined
that there existed disputed questions of fact in respect whereof no definite
finding could be arrived at having regard to the modus operandi of the persons
14. The private dispute between
the parties were, thus, sought to be converted into a public interest
litigation for the purpose of making an enquiry into the affairs of the bank by
The Committee was consisted of the
"(a) Mr. JR Prabhu - Chairman
Banking, Ombudsman, Mumbai (b) Mr. VS Das, Regional - Member Director, RBI,
Ahmedabad 18 (c) Mr. RV Tyar - Member General Manager, Bank of Baroda Or (d)
Mr. S. Arunachalam, - Member General Manager, Indian Bank.
As per the judgment of the learned
single judge, the Committee consisted of three members. When the Committee
dealt with the cases of Bank of Baroda, only the representative of Bank of
Baroda acted as a member and when the Committee dealt with the cases of Indian
Bank, only the representative of the Indian Bank acted in the said capacity.
The other members of the Committee were Shri JR Prabhu, Banking Ombudsman,
Mumbai and Mr. VS Das, Regional Director, RBI, Ahmedabad.
15. We have been taken through the
report submitted by the Committee.
The Committee did a yeoman job. It
went into various aspects of the matter.
It tried to cover as much ground
as possible. It noticed the facts leading to setting up of the Committee. It
considered the written submissions as also the oral submissions of the
appellant and the submissions made by the 19 respective banks, the officers of
the banks, the intermediaries as also the actions taken by the banks concerned.
Whereas general observations and
recommendations by all the members appear to be unanimous, no unanimity however
could be reached in regard to the question as to what direction could be issued
in the matter.
Whereas the Chairman and Regional
Director, RBI were of the opinion that the banks should refund the disputed
amounts of deposit to the depositors; other two members representing the Banks
were of the view that the return of the deposits may amount to double payments
to the depositors.
It was opined:
"The Committee is required to
examine each and every case on its own merits with reference to the records and
its findings in regard to amount due and payable to the concerned petitioner
borrowers in terms of the terms of reference based on the orders of the Gujarat
The modus operandi in perpetrating
the fraud in respect of all the petitioner depositors has been the same. There
have been only minor variations here and there. Couple of petitioner depositors
has mentioned during their deposition before the Committee that some of them
had gone to the banks' branches along with the middlemen/intermediaries for
placing the deposits. The photographs and specimen signature of all the
authorized signatories of the cooperative societies/cooperative banks were not
available on the banks' record. The 20 banks records also do not reveal that
the authorized signatories had signed the account opening forms and the loan
documents in the presence of the officials of the banks. The resolutions
purported to have been passed for the purpose of availing of loans by the
cooperative societies/cooperative banks have not been on their letterheads in
almost all cases. In view of these reasons it has not been considered necessary
to differentiate the cases of the petitioners and the Committee's
recommendations are uniformly applicable to all the petitioner depositors.
A Statement indicating the
disputed and undisputed amounts submitted by the two banks to the Committee is
given in Annexure 3. The undisputed amount deposited with the Gujarat High
Court by Bank of Baroda amounts to Rs. 3.16 crore and interest thereon at
Savings bank rate Rs.29.02 lakh. An undisputed amount of Rs. 16.20 lakh has
been remitted to the Income Tax Authority.
The disputed amount of deposits
aggregate Rs. 20.00 crore. In the case of Indian Bank, the undisputed and
disputed amounts of deposits aggregate Rs. 72.85 lakh and Rs. 4.45 crore
respectively. The bank has stated that it has deposited the undisputed amount
of Rs.72.85 lakh with interest of Rs. 1.66 lakh in the Court.
The refund of the deposits to the
petitioner depositors by the banks should, however, be subject to certain terms
and conditions which are as under:
cooperative societies/cooperative banks should execute necessary documents as
per the banks' procedure.
could take indemnity bonds from persons acceptable to them apart from the
cooperative societies/cooperative banks before effecting the refund of the
disputed amount of deposits.
In case at a
later date for any reason the amounts are required to be refunded to the banks
by the cooperative societies/cooperative banks they will have to pay interest at
the 21 prime lending rates of the bank concerned compounded at half yearly rest
from the date of refund of the deposits by the banks till the date of repayment
by the cooperative societies/ cooperative banks to the two banks."
Unanimity, however, was arrived at
that no interest on the amount of deposits would be payable. It opined that the
officers of the banks were primarily responsible for perpetration of fraud.
Mr. Rao had taken us through
various parts of the report as also the charge sheet submitted by the C.B.I. to
contend that involvement of the brokers/commission agents appointed by some of
the cooperative societies has also been found both by the Committee as also by
the C.B.I. It was also submitted that in any event most of them were aware of
the illegal transactions which had been going on and that they had directly or
indirectly connived with the officers of the banks in respect of their
activities, which would be apparent from the fact that they used to get a large
amount by way of interest, a portion of which was paid in cash and which was
not even accounted for.
Our attention has also been drawn
to the charge-sheet filed by the Central Bureau of Investigation, wherein
Jyotiben, the agent of the 22 cooperative societies/bank has also been made an
accused. One of the cooperative societies, it was pointed out, had even
authorized her to enter into negotiations with the Bank.
In the said charge-sheet, it was
"It has been stated by the
executive and office bearers of the society that, we have appointed Jyotiben as
the agent for the purpose of depositing and withdrawing the F.D.
at Surat and to give loan on the
F.D. Receipts etc. It is the say of this Jyotiben that, since there is a big
lobby of industrialists and builders in Surat city, if they are given the loans
on our deposits receipts, they are paying us 24% interest and on the other
side, we are getting 11% interest, and thus, since we have been getting 35%
interest, the deposits were made through them."
Mr. Sundaram, on the other hand,
submitted that the fact that it was only the officers of the banks who have
been found to be primarily liable and their modus operandi was to grant loan
utilizing the said FDRs.
wherefor the cooperative societies
had no role to play.
It was urged that in view of the
fact that the officers of the banks have been found to be liable, the
cooperative societies should not be punished.
16. A writ court exercising the
power of judicial review has a limited jurisdiction. A writ petition would lie
against a State within the meaning of Article 12 of the Constitution of India.
Indisputably, exercise of jurisdiction by the High Court is permissible in a
case where action of the State is found to be unfair, unreasonable or
arbitrary. The question which should have been posed by the High Court was as
to whether the action of the bank was so arbitrary so as to invoke the public
law jurisdiction. If the answer to the said question was to be in the negative,
the High Court should have refused to exercise its jurisdiction.
A fraud has been practiced on the
banks. Primary accused may be the bank officers but a conspiracy with them by
the outsiders has also been alleged. The original FDRs only in some cases are
available; in most of the cases they are not. Even the Committee could not
decide for as to which one was the original FDR and which was not. It could not
distinguish between an original FDR and the Xerox copy thereof.
Opinion of the expert thereon
might have been received, but the final verdict thereupon in the cases
initiated by the C.B.I. is still awaited.
17. The law as regards application
of the power of judicial review, inter alia, in the contractual filed stands
covered by a large number of decisions.
(See LIC of India & anr. vs.
Consumer Education & Research Centre &
ors., [(1995) 5 SCC 482], Sanjana
M. Wig (Ms) vs. Hindustan Petroleum Corpn. Ltd. [(2005) 8 SCC 242], ABL
International Ltd & Anr.. vs. Export Credit Guarantee Corporation of India
Ltd & ors.. [(2004) 3 SCC 553], The D.F.O, South Kheri & ors. vs. Ram
Sanehi Singh [(1971) 3 SCC 864]. We, however, do not think that facts involved
in each case and the law laid down therein need to be discussed at length as
there does not exist any dispute in regard to basic principles laid down
In M/s Hyderabad Commercials vs.
Indian Bank & ors. [1991 Supp. (2) SCC 340], this Court held:
"Since the basic facts
regarding the unauthorized transfer of the disputed amount from the appellant's
account as well as the bank's liability was admitted, there was no
justification for the High Court to direct the appellant to file suit on ground
of disputed questions of fact. The respondent bank is an instrumentality of the
State and it must function honestly to serve its customers.
Would the ratio laid down therein
apply in the instant case? We do not think so. The question as to whether fraud
has been committed by the 25 officers of the bank is pending consideration
before a competent criminal court. There are other various disputed questions
which are required to be gone into in the said proceeding. The role played by some
of the writ petitioners - respondents is also in issue. Such a seriously
disputed questions of fact, in our opinion, could not have been gone into by
the writ court.
We would accept the proposition of
law as propounded by this Court in Guruvayoor Devaswom Managing Committee &
anr. vs. C.K. Rajan &
ors. [(2003) 7 SCC 546]. In that
case it was, inter alia, observed that public interest litigation procedures
may be adopted in a case where initially the writ petition was filed as a
private interest litigation. (See also Ashok Lanka & anr. vs. Rishi Dixit
& ors. (2005) 5 SCC 598 at page 618).
We may in this behalf notice
development of law in other jurisdiction.
Abram Chayes in his article on
"The Role of the Judge in Public Law Litigation" Harv. Law. Rev. Vol.
89 (1976) at Pg. 1281 opines that "Traditionally, adjudication has been
understood to be a process for resolving disputes among private parties which
have not been privately settled." He thus emphasizes the need for a
"Public Law" model wherein 26 "the traditional adversary
relationship is suffused and intermixed with negotiating and mediating
processes at every point. The judge is the dominant figure in organizing and
guiding the case, and he draws for support not only on the parties and their
counsel, but on a wide range of outsiders-masters, experts and oversight
personnel." He goes on to give examples of school desegregation,
employment discrimination, and prisoners' or inmates' rights cases as also
antitrust, securities fraud and other aspects of the conduct of the corporate
business, bankruptcy and reorganizations, union governance, consumer fraud,
housing discrimination, electoral reapportionment, environmental management-
fields that display in varying degrees the features of public law litigation.
According to him, The public law
litigation model inter-alia has the following features:
"7. The judge is not passive,
his function limited to analysis and statement of governing legal rules; he is
active, with responsibility not only for credible fact evaluation but for
organizing and shaping the litigation to ensure a just and viable outcome.
8.The subject matter of the
lawsuit is not a dispute between private individuals about private rights, but
a grievance about the operation of public policy."
27 In Krishna Swami v. Union of
India and another With Raj Kanwar v. Union of India and Another (1992) 4 SCC
605, a constitutional bench of this court had to decide upon the
maintainability of a writ petition filed under Article 32 against the removal of
a Supreme Court judge without impleading the judge himself as a party to the
The court on the role of an
investigation committee opined:
"The investigation done by
the Committee, thus is to find whether the alleged misbehavior incapacity has
been proved. Undoubtedly, the public law litigation often contradicts the
premise behind those of private law. In public law wider public interest it
involved over and beyond he contending parties. It concerns the future and
private law litigation is retrospective in operation.
What the court could do? It could
appoint a Committee. But the decision of the Committee would not have been
decisive. The Division Bench appears to have applied its mind on the report,
but in the absence of any categorical finding that it was the officers of the
Banks alone who were liable, no direction as has been done in the instant case
should have been issued. It may be that in appropriate cases, the court may
find the recommendations made by the Committee acceptable.
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 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 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 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 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
FDRs 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 of interest. What, however, happens if in the meanwhile in
the absence of the requisite funds being available to them, they find it
difficult to run the day-to-day affairs? 29
20. Answers thereto may be
difficult to find but it is not a wholly impossible task. We think that the
appellant Bank 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 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 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 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 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 release the
same on a further condition that the amount of FDR would remain with them and
on that basis, loans may be 30 granted of such amount. The usual precautions in
regard thereto may also be taken by the Bank(s).
23. We, while saying so, do not
intend to lay down any law. 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 the criminal court to dispose of the criminal cases pending before them
with utmost expedition.
These appeals are allowed with the
aforementioned directions. There shall, however, be no order as to costs.
[Lokeshwar Singh Panta] New Delhi;