Case Note & Summary
The dispute arose from a cash credit facility extended by The Maratha Mandir Co-operative Bank Ltd. (respondent no. 1) to its member, Shaikh Mohammed Rafique (respondent no. 2). The petitioner, Shri Shaukatali Mohammed Idris Khan, stood as a surety for the loan of Rs. 1,00,000, having executed a surety bond at a subsequent stage when the facility was increased from Rs. 50,000 to Rs. 1,00,000. The trial court held the petitioner liable as surety, and the Maharashtra State Co-operative Appellate Court dismissed his appeal. Aggrieved, the petitioner filed a writ petition before the High Court of Judicature at Bombay, challenging the appellate order on three grounds: lack of jurisdiction of the co-operative court over a non-member, invalidity of the surety bond due to non-compliance with the restrictions under section 45 read with Rule 47, and the alleged prohibition under section 44(1) against granting a loan on the security of a non-member. The High Court rejected all contentions. It held that section 91(1)(d) of the Maharashtra Co-operative Societies Act, 1960, explicitly includes sureties of members within the jurisdiction of the co-operative court, regardless of their membership status. On the second issue, the court clarified that Rule 47 requires the Registrar to issue general directions for regulating transactions with non-members, not a case-by-case approval, and since the petitioner failed to point to any specific restriction violated, the surety bond remained valid. Regarding section 44(1), the court interpreted the provision as prohibiting loans to non-members on the security of non-members; as the loan was granted to a member, the section did not apply. Consequently, the High Court dismissed the writ petition, affirming the decisions of the lower courts.
Headnote
A) Co-operative Law - Jurisdiction of Co-operative Court - Section 91(1)(d) Maharashtra Co-operative Societies Act, 1960 - Surety of Member - The co-operative court has jurisdiction over sureties of members irrespective of the surety's membership status - The petitioner, a non-member surety, was held to be properly impleaded and the dispute was maintainable before the co-operative court under section 91(1)(d) (Paras 2-3). B) Co-operative Law - Validity of Surety Bond - Section 45 Maharashtra Co-operative Societies Act, 1960 read with Rule 47 of Maharashtra Co-operative Societies Rules, 1961 - Restrictions on Transactions with Non-Members - Rule 47 does not require the Registrar to issue directions for each specific surety contract; general directions suffice - The petitioner failed to show that the surety bond was executed contrary to any specific regulation or restriction issued by the Registrar - Held that the surety bond was valid and enforceable (Paras 4-5). C) Co-operative Law - Interpretation of Loan Prohibition - Section 44(1) Maharashtra Co-operative Societies Act, 1960 - Prohibition on Loan on Security of Non-Member - Section 44(1) prohibits granting a loan to a non-member on the security of a non-member; it does not bar a loan to a member even if the surety is a non-member - As the original borrower was a member, the loan transaction did not violate section 44(1) - Held that the petitioner's contention based on section 44(1) was without merit (Paras 6-7).
Issue of Consideration
Whether the co-operative court had jurisdiction over a non-member surety; whether the surety bond was invalid due to non-compliance with section 45 and Rule 47; whether the loan granted to a member on the security of a non-member surety violates section 44(1) of the Maharashtra Co-operative Societies Act, 1960
Final Decision
The High Court dismissed the writ petition, holding that the co-operative court had jurisdiction under section 91(1)(d), the surety bond was valid as Rule 47 does not require case-by-case approval, and the loan to a member did not violate section 44(1).
Law Points
- co-operative court jurisdiction over non-member surety under section 91(1)(d)
- surety bond valid despite absence of Registrar's specific approval under Rule 47
- section 44(1) prohibits loan on security of non-member but loan to member is not barred
