Case Note & Summary
The case involves two writ petitions filed by Rupee Cooperative Bank Limited against Vijaya Paints Pvt. Ltd. and others. The bank had obtained an ex parte award in Dispute No.391 of 2001 against the respondents for recovery of a loan. The respondents (guarantors) applied to set aside the ex parte award, which was allowed by the Cooperative Court (Trial Court) and upheld by the Cooperative Appellate Court. However, the Appellate Court erroneously held that the award stood set aside against all respondents, including the principal borrower (respondent No.1) who had not applied for setting aside. Consequently, the Appellate Court permitted respondent No.1 to participate in the remanded proceedings and cross-examine witnesses. In a separate order, the Cooperative Court directed the bank to accept Rs.32,58,373 from respondent No.1 towards the outstanding loan balance, which was upheld by the Appellate Court. The bank challenged both orders. The High Court held that the ex parte award was set aside only against the guarantors (respondent Nos.2 and 3) and not against the principal borrower (respondent No.1). The Court further held that the principal borrower cannot be allowed to participate in proceedings without depositing the loan amount, as the liability of the principal borrower is primary. The High Court set aside the impugned orders and remanded the matter to the Cooperative Court for fresh consideration, directing that respondent No.1 may participate only upon depositing the amount.
Headnote
A) Cooperative Law - Ex Parte Award - Setting Aside - Order 9 Rule 13 CPC - Section 91 Maharashtra Cooperative Societies Act - The Cooperative Court set aside ex parte award against guarantors but not against principal borrower - The Appellate Court erred in holding that the award stood set aside against all respondents - Held that the award remains valid against the principal borrower who did not seek setting aside (Paras 4-10).
B) Cooperative Law - Loan Recovery - Deposit Condition - Section 91 Maharashtra Cooperative Societies Act - The Cooperative Court directed the bank to accept Rs.32,58,373 from principal borrower towards outstanding loan - The Appellate Court upheld this direction - Held that the principal borrower cannot be allowed to participate in proceedings without depositing the admitted loan amount (Paras 5-11).
Issue of Consideration
Whether the setting aside of an ex parte award against guarantors automatically sets it aside against the principal borrower, and whether the principal borrower can be directed to deposit the loan amount as a condition for participation in proceedings.
Final Decision
The High Court allowed both writ petitions, set aside the impugned orders of the Cooperative Appellate Court, and remanded the matter to the Cooperative Court for fresh consideration. The Court directed that respondent No.1 (principal borrower) may participate in the proceedings only upon depositing the amount as directed by the Cooperative Court.
Law Points
- Cooperative Court jurisdiction
- ex parte decree set aside
- liability of principal borrower vs guarantor
- Order 9 Rule 13 CPC
- Section 91 Maharashtra Cooperative Societies Act
Case Details
2019 LawText (BOM) (05) 25
Writ Petition No. 5123 of 2017 with Writ Petition No. 3587 of 2018
Mr. S.S. Panchpor i/b Sanjay Natu Law Office for the Petitioner, Mr. S.S. Kanetkar for Respondent Nos.1 to 3
Rupee Cooperative Bank Limited
Vijaya Paints Pvt. Ltd. and ors.
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Nature of Litigation
Writ petitions challenging orders of Cooperative Court and Cooperative Appellate Court regarding setting aside of ex parte award and direction to accept loan amount.
Remedy Sought
Petitioner bank sought to set aside the orders that allowed the principal borrower to participate in proceedings without depositing the loan amount and that erroneously set aside the ex parte award against all respondents.
Filing Reason
The Cooperative Appellate Court held that the ex parte award stood set aside against all respondents, including the principal borrower who had not applied for setting aside, and permitted the principal borrower to participate in remanded proceedings.
Previous Decisions
Cooperative Court (Trial Court) set aside ex parte award against respondent Nos.2 and 3 (guarantors) but not against respondent No.1 (principal borrower). Cooperative Appellate Court modified the order, holding that the award stood set aside against all respondents.
Issues
Whether the setting aside of an ex parte award against guarantors automatically sets it aside against the principal borrower?
Whether the principal borrower can be directed to deposit the loan amount as a condition for participation in proceedings?
Submissions/Arguments
Petitioner bank argued that the ex parte award was set aside only against the guarantors and not against the principal borrower, and that the principal borrower cannot be allowed to participate without depositing the loan amount.
Respondents argued that the award was set aside against all respondents and that the principal borrower should be allowed to participate without deposit.
Ratio Decidendi
The setting aside of an ex parte award against guarantors does not automatically set it aside against the principal borrower, as the liability of the principal borrower is primary and independent. The principal borrower cannot be allowed to participate in proceedings without depositing the admitted loan amount.
Judgment Excerpts
The challenge in Writ Petition No. 5123 of 2017 is to the orders dated 2nd January 2017 and 1st April 2017 made by the Cooperative Court (Trial Court) and the Cooperative Appellate Court (Appeal Court) holding inter alia that ex parte judgment and award in Dispute No.391 of 2001 stands set aside against the respondents herein and not merely as against respondent Nos.2 and 3 herein.
The challenge in Writ Petition No. 3587 of 2018 is to the order dated 8th February 2018 passed by the Cooperative Court (Trial Court) and the order dated 22nd February 2018 passed by the Cooperative Appellate Court (Appeal Court) directing the petitioners to accept an amount of Rs.32,58,373 from respondent No.1 or any other amount offered by respondent No.1 towards outstanding loan balance.
Procedural History
The bank filed Dispute No.391 of 2001 before the Cooperative Court for recovery of loan. An ex parte award was passed. Respondent Nos.2 and 3 (guarantors) applied to set aside the ex parte award, which was allowed by the Cooperative Court on 2nd January 2017. The Cooperative Appellate Court on 1st April 2017 modified the order, holding that the award stood set aside against all respondents. Subsequently, the Cooperative Court on 8th February 2018 directed the bank to accept Rs.32,58,373 from respondent No.1, which was upheld by the Appellate Court on 22nd February 2018. The bank filed two writ petitions challenging these orders.
Acts & Sections
- Maharashtra Cooperative Societies Act, 1960: Section 91
- Code of Civil Procedure, 1908: Order 9 Rule 13
