Case Note & Summary
The petitioner, Tarulata Amritlal Bava, filed a writ petition under Articles 226 and 227 of the Constitution challenging a Recovery Certificate dated 25 September 2018 issued by the Deputy Registrar, Cooperative Societies, Thane City (respondent no. 3). The certificate confirmed an earlier Recovery Certificate dated 12 September 2013 against the petitioner, who was a guarantor and had offered collateral security for commercial borrowings by respondent no. 6, Amritlal Jayantilal Bava, her husband. The background of the dispute involves a term loan facility of Rs. 1.90 crores sanctioned by respondent no. 5, Thane Bharat Sahakari Bank Ltd., to M/s. Shree Vaishnavi Enterprises, a sole proprietorship of Amritlal, for purchase of 10 trucks/trailers. The bank later discovered procedural violations, misappropriation, and fraudulent utilization of the loan amounts, with involvement of bank officers. In July 2013, Amritlal filed a dispute under Section 91 of the Maharashtra Cooperative Societies Act, 1960 (MCS Act) before the Cooperative Court against the bank, alleging fraud by the branch manager. In August 2013, the bank also filed an FIR against Amritlal, the branch manager, and another person. The bank then initiated recovery proceedings under Section 101 of the MCS Act, leading to the first Recovery Certificate dated 12 September 2013. The petitioner sought documents from the Deputy Registrar, including the loan application, sanction letter, and statements of account, but these were not provided. The Deputy Registrar confirmed the certificate on 25 September 2018 without supplying the documents or passing a reasoned order. The petitioner argued that the recovery certificate was issued in violation of principles of natural justice and that the bank had not disclosed the documents despite requests. The court, after hearing both sides, found that the Deputy Registrar had failed to provide the documents sought by the petitioner and had not passed a reasoned order, thereby violating natural justice. The court quashed the impugned Recovery Certificate dated 25 September 2018 and the earlier certificate dated 12 September 2013, and remanded the matter to the Deputy Registrar for fresh consideration after providing the petitioner with the requested documents and a proper hearing. The court also directed the bank to produce all relevant documents.
Headnote
A) Cooperative Law - Recovery Certificate - Natural Justice - Sections 101, 137 Maharashtra Cooperative Societies Act, 1960 - Guarantor challenged recovery certificate on ground that Deputy Registrar did not supply documents sought and passed order without proper hearing - Court held that failure to provide documents and pass reasoned order violated principles of natural justice - Recovery certificate quashed (Paras 1-10). B) Cooperative Law - Guarantor Liability - Fraud - Sections 91, 101 Maharashtra Cooperative Societies Act, 1960 - Petitioner was guarantor for loan taken by her husband which was allegedly misappropriated - Bank filed police complaint and cooperative dispute - Court noted that recovery proceedings cannot be sustained when borrower has raised fraud allegations and bank has not cooperated in providing documents (Paras 2-8).
Issue of Consideration
Whether the impugned Recovery Certificate dated 25 September 2018 confirming the earlier Recovery Certificate dated 12 September 2013 against the petitioner-guarantor is liable to be set aside for violation of principles of natural justice and failure to provide documents.
Final Decision
The court allowed the writ petition, quashed the impugned Recovery Certificate dated 25 September 2018 and the earlier Recovery Certificate dated 12 September 2013, and remanded the matter to the Deputy Registrar for fresh consideration after providing the petitioner with the requested documents and a proper hearing. The bank was directed to produce all relevant documents.
Law Points
- Natural justice
- Right to documents
- Recovery certificate
- Guarantor liability
- Cooperative societies
- Section 101 MCS Act
- Section 137 MCS Act
- Section 91 MCS Act
