Indian Bank Vs.
Godhara Nagrik Coop.Credit Soc.Ltd. & ANR.  INSC 603 (24 March 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION I. A. No. 1 IN CIVIL APPEAL No. 3303 OF
2005 Indian Bank ... Appellant(s) Versus Godhara Nagrik Coop. Credit Society
Ltd. & Anr. etc. etc. ... Respondent(s) WITH I. A. No. 1 IN CIVIL APPEAL
No. 3336 OF 2005, I. A. No. 1 IN CIVIL APPEAL No. 3337 OF 2005 AND I. A. No. 1
IN CIVIL APPEAL No. 3338 OF 2005 ORDER 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.
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 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 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 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 3 practiced to which the
depositors and the officers of the banks were parties.
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 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.
2.5.1] A Division
Bench of the said Court in an intra court appeal preferred there against,
however, stayed only the 4 operation of some of the clauses of the said order.
The Committee, however, was allowed to function.
2.5.2] A special
leave petition filed there against has been dismissed by this Court with
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.
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 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 depositors.
5 2.8.1] Appellants
filed appeals aggrieved by the said order, upon obtaining special leave
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
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."
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 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
depositors. Learned Counsel appearing on behalf of the respondent prays for
time till after the vacation.
6 Let the matter
appear two weeks after reopening on a miscellaneous day.
There will be interim
order staying the operation of the impugned order."
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
3] Having heard the
learned counsel for the parties at length and having noticed and considered the
propositions of law 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]:- "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 7 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?
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 8 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 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
There shall, however,
be no order as to costs."
Bank by means of these applications submits that this Court has proceeded on
the basis that in the 9 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.
has averred that in the absence of any case 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 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 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 with interest.
10 5] The
applicant-bank next submits that there is no direction 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 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 the text of the
judgment, the bank should proceed on the basis that if the tainted societies
are innocent and thus to inform them in regard to the matured amount as on date
and then to invest the said amount in the bank in the form of FDRs. 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 directions contained in the judgment to
the extent 11 that there is no categorical direction that invested FDR amount
will be subject to civil or criminal cases.
6] On the above-noted
premise, the present applications have been filed seeking clarification of the
directions relating to 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 which are in no way involved in scam, 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 there was no CBI investigation/case pertaining to the matters
of Indian Bank have not been brought to the notice of this Court at the time of
hearing and disposal of the appeals filed by the Indian Bank. Had the correct statement
of facts been pleaded and contended by the applicant-Indian Bank at the time of
hearing of its appeals, undisputedly 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 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 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 not apply to the cases of the
Indian Bank. The Indian Bank, however, in the interest of cooperative societies
whose 13 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 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 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
FDRs, the Indian Bank shall not debar or preclude the innocent cooperative
societies-depositors from taking loan against FDRs being deposited with the
10] 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 14 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-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.
(S. B. Sinha)
(Lokeshwar Singh Panta)