Bombay High Court
The Official Liquidator C/O Vasantdada … vs Savannah Lifestyle Pvt. Ltd. And Ors on 11 March, 2025
2025:BHC-AS:11428
Megha 2_ia_13400_2024 and group_fc.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
INTERIM APPLICATION NO.13400 OF 2024
IN
WRIT PETITION NO.11610 OF 2022
The Official Liquidator ...Applicant
(original Respondent No.2)
V/s.
1. Savannah Lifestyle Private
Limited.
2. Milind Kasodkar
Resolution professional of M/s.
Shaila Clubs & Resorts Private
Ltd. ...Respondents
REVIEW PETITION NO.85 OF 2024
WITH
INTERIM APPLICATION NO.10662 OF 2024
IN
WRIT PETITION NO.11610 OF 2022
Amit Prabhakar Kore ...Review Petitioner
V/s.
1. Savannah Lifestyle Private
Limited.
2. Special Recovery Officer, Vasantdada
Shetkari Sahakari Bank Ltd.
3. The Official Liquidator, Vasantdada
Shetkari Sahakari Bank Ltd.
2. Milind Kasodkar
Resolution professional of M/s.
Shaila Clubs & Resorts Private
Ltd.
Digitally
5. Sanjay Mahadeo Pratap
signed by
MEGHA
MEGHA SHREEDHAR
SHREEDHAR PARAB
PARAB Date:
2025.03.11
19:11:51
+0530
6. Mohamad Iqbal Abdul Ghani Bhatti
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7. Khalil Ahmad Abdul Ghani Bhatti
8. Abdul Khalil Abdul Ghani Bhatti
9. Jabir Abdul Ghani Bhatti ...Respondents
WITH
REVIEW PETITION NO.38 OF 2023
WITH
INTERIM APPLICATION NO.17497 OF 2023
IN
WRIT PETITION NO.11610 OF 2022
M/s. Shaila Clubs & Resorts Private
Limited ...Petitioner
(original Respondent
No.3)
V/s.
1. Savannah Lifestyle Private
Limited.
2. Special Recovery Officer
3. The Official Liquidator
4. Sanjay Mahadeo Pratap
5. Mohamad Iqbal Abdul Ghani Bhatti
6. Khalil Ahmad Abdul Ghani Bhatti
7. Abdul Khalil Abdul Ghani Bhatti
8. Jabir Abdul Ghani Bhatti ...Respondents
______________
Mr. Navroz Seervai, Senior Advocate with Mr. Aseem Naphade and
Mr. Shivaji Masal for the Applicant in IA/13400/2024 in
WP/11610/2022.
Mr. Vikram Nankani, Senior Advocate with Mr. Ameet Naik, Mr.
Tushar Hathiramani, Mr. Abhishek Kale, Mr. Vivek Dwivedi, Mr. Nevil
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Chopra, Mr. Aditya Khare and Ms. Rebecca Singh i/b. M/s. Naik Naik
and Co. for the Review Petitioner.
Dr. Virendra Tulzapurkar, Senior Advocate with Mr. Mandar
Soman, Ms. Shruti Maniar, Ms. Shivani Bhandary and Ms. Kashmita
Belwalkar i/b. M/s. Solomon and Co. for Respondent No.1.
Mr. Suresh Yadav with Mr. Avinash Khondkar and Ms. Khushbu
Bhansali for Respondent No.4.
Mr. P.V. Nelson Rajan, AGP for Respondent -State.
Ms. Savina R. Crasto, AGP for Respondent-State in RPW/85/2024
& IA/10662/2024.
______________
CORAM : SANDEEP V. MARNE, J.
Judgment reserved on : 26 February 2025.
Judgment pronounced on : 11 March 2025.
Judgment:
A. THE CHALLENGE 1) Liquidator of Vasantdada Shetkari Sahakari Bank Ltd.
(the Bank) has filed Interim Application No. 13400 of 2024 seeking
recall of order dated 21 October 2022, which is passed in view of
Minutes of Order dated 20 October 2022. Review Petition No.85 of
2024 is filed by Mr. Amit Prabhakar Kore, suspended director of M/s.
Shaila Clubs & Resorts Private Limited (Shaila Clubs) seeking
review of Order dated 21 October 2022. Shaila Clubs has filed Review
Petition No. 38 of 2023 seeking review of the Order dated 21 October
2022.
2) Thus, the Interim Application and the two Review
Petitions essentially seek either recall or review of order passed by
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this Court on 21 October 2022 disposing of Writ Petition No.11610 of
2022 based on Minutes of Order tendered on 20 October 2022. Since
all the three proceedings seek either recall or review of the same
order, the same are decided by this common judgment.
B. FACTS 3) Considering the narrow controversy involved in the
present application and review petitions, it is not necessary to narrate
the chequered history of the case. Shaila Clubs owns and operates a
recreational club at Plot No. NA/164(Pt) CTS No.C/12/A, Everest
Cooperative Housing Society Limited, 151, Hill Road, Bandra (West),
Mumbai 400 050. For the purpose of setting up and commencing the
recreational club, Shaila Clubs applied for loan from the Bank as well
as from the Greater Bombay Co-operative Bank. On 2 May 2005 both
the Banks agreed to sanction credit facilities in favour of Shaila
Clubs, which were duly secured by the Shaila Clubs by mortgaging its
property at Bandra vide registered Deed dated 27 May 2005. It
appears that Shaila Clubs repaid entire loan amount disbursed by
Greater Bombay Co-operative Bank and the Bank remained the sole
mortgagee in respect of the Shaila Clubs premises since the Bank’s
loan was not fully repaid.
4) By Conducting Agreement dated 18 May 2007, Shaila
Clubs permitted M/s. Savannah Lifestyle Private Limited
(Savannah) to operate the recreational club for a period of 15 years
and 6 months in consideration of monthly royalty and compensation.
It is Bank’s case that since Shaila Clubs defaulted in repayment of
loan disbursed by the Bank, its account was classified as NPA and the
Special Recovery Officer of the Bank initiated recovery proceedings
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against Shaila Clubs. The Bank obtained recovery certificate from
Deputy Registrar of Co-operative Societies, Mumbai, under Section
101 of the Maharashtra Co-operative Societies, 1960 (M.C.S. Act,
1960) and filed an application before the Additional Chief
Metropolitan Magistrate, Esplanade, Mumbai, seeking physical
possession of the Shaila Clubs’ land and property. By order dated 22
October 2018, the learned Additional Chief Metropolitan Magistrate
allowed the Application preferred by the Bank and authorised the
recovery officer to take over possession of the properties of Shaila
Clubs under police assistance. Savannah filed Writ Petition No.14517
of 2018 in this Court challenging the Magistrate’s order dated 22
October 2018. By order dated 20 December 2018, this Court granted
interim stay to the Magistrate’s order on condition of deposit of
amount of Rs.50,00,000/- by Savannah. It appears that Savannah filed
application bearing C.C. No.1052/MA/2019 before the Chief
Metropolitan Magistrate seeking recall of the order dated 22 October
2018. The application was however rejected by the learned Magistrate
by order dated 19 June 2019. Savannah filed Writ Petition No.7542 of
2019 before this Court challenging Magistrate’s order dated 19 June
2019. For showing bonafides, Savannah was made by this Court to
deposit an amount of Rs.2 crores. On condition of such deposit, this
Court stayed possession order passed by the learned Magistrate. By
order dated 17 January 2020, Writ Petition No.7542 of 2019 was
allowed by setting aside Magistrate’s order dated 19 June 2019 and
the matter was remanded before the learned Magistrate for fresh
decision in accordance with law. The learned Additional Chief
Metropolitan Magistrate thereafter passed order dated 4 March 2020
once again dismissing Savannah’s application for recall of the order
dated 22 October 2018 holding that Conducting Agreement did not
create tenancy in favour of Savannah. Savannah filed Writ Petition
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No.11610 of 2022 [Writ Petition (Lodging) No.5289 of 2020]
challenging Addl. CMM’s order dated 4 March 2020. Initially, interim
stay was granted to the Magistrate’s order by order dated 20 March
2020.
5) In the meantime, Shaila Clubs was admitted into
Corporate Insolvency Resolution Process (CIRP) in pursuance of
order passed by the National Company Law Tribunal (NCLT) on 29
October 2021 in pursuance of Petition filed under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (IBC) by legal representatives
one Mrs. Meghna Rajeev Kore. Accordingly, Resolution Professional
was appointed in respect of Shaila Clubs. Bank filed its claim with
the Resolution Professional and became part of committee of
creditors. Savannah also filed its claim against Shaila Clubs.
6) In the above background, it appears that Government of
Maharashtra issued Government Resolution (GR) dated 6 June 2022,
granting permission to undertake one time loan payment settlement
for Urban Co-operative Banks as per the scheme declared in
Annexure-A. The Liquidator of the Bank accordingly sent One Time
Settlement (OTS) proposal to Savannah calling upon it to deposit an
amount of Rs. 77,16,350/- on behalf of Shaila Clubs for closure of the
loan account. Savannah responded vide its letter dated 11 August
2022. Though Savannah showed willingness to deposit amount of Rs.
77,16,350/-, it requested the Liquidator not to close the loan account of
Shaila Clubs but to assign the same alongwith all security, rights and
benefits to Savannah and substitute Savannah in place of the Bank.
In the above background, it appears that the Bank and Savannah
signed and submitted Minutes of Order dated 20 October 2022 in Writ
Petition No.11610 of 2022 before this Court, under which it was
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agreed that actual dues of Shaila Clubs to the Bank is Rs.
8,97,73,098/- and that Savannah had already deposited amount of
Rs.2,50,00,000/- with the Bank and Savannah offered to pay further
amount of Rs.87,92,000/- to the Bank. Accordingly, Savannah paid
amount of Rs.87,92,000/- to the Bank. Under the Minutes of Order,
the Bank assigned the loan amount of Shaila Clubs alongwith all
rights, securities, mortgages, charges, remedies and benefits attached
thereto in favour of Savannah. The Petition was agreed to be
withdrawn under the Minutes of Order. This Court accordingly
disposed of Writ Petition No.11610 of 2022 by taking on record the
Minutes of Order dated 20 October 2022 in terms thereof.
7) It appears that the suspended director of Shaila Clubs Mr.
Amit Kore complained to the Liquidator vide letter dated 17
November 2022 objecting to assignment of loan of Shaila Clubs to
Savannah. The Bank addressed letter dated 17 November 2022 to the
Resolution Professional requesting him not to act on the Minutes of
Order and asserting that the mortgaged property of Shaila Clubs was
still with the Bank. The Bank thereafter wrote to Shaila Clubs on 18
November 2022 referring to the objections of Mr. Amit Kore and
stating that the OTS offered to Savannah has been cancelled and
returning the amount of Rs.87,92,000/- to Savannah. However,
Savannah refused to accept the demand drafts. The Liquidator also
filed an affidavit in Writ Petition No.11610 of 2022 bringing on record
the subsequent events and recorded that the decisions to offer benefit
of OTS scheme to Savannah and to enter into consent terms were
incorrect.
8) On the strength of the Order dated 21 October 2022
passed by this Court in terms of the Minutes of Order, Savannah filed
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Petition under the provisions of Section 7 of the IBC against Shaila
Clubs. The Bank once again wrote to Savannah on 13 January 2023
about withdrawal of the OTS scheme extended to it.
9) In the above background, Shaila Clubs has filed Review
Petition No.38 of 2023 for review of the order dated 21 October 2022.
The Bank filed its claim for Rs.9,53,39,914/- with the Resolution
Professional and also filed intervention application before the NCLT
in Petition filed by Savannah against Shaila Clubs. On the basis of
Petition filed by Savannah, NCLT once again admitted Shaila Clubs
into CIRP appointing Resolution Professional by order dated 28 July
2023. The Bank challenged NCLT’s order dated 28 July 2023 before
the National Company Law Appellate Tribunal (NCLAT). One of the
suspended directors and shareholders of Shaila Clubs also filed appeal
before the NCLAT. NCLAT passed interim order dated 27 September
2023 directing that no further steps be taken in pursuance of order
dated 28 July 2023.
10) Savannah filed Writ Petition (L) No.31466 of 2023
challenging Bank’s cancellation of OTS offer. By order dated 6 March
2024, this Court stayed Bank’s cancellation of OTS scheme. The said
Petition is pending. In the above background, the Bank has filed
Interim Application No.13400 of 2024 seeking recall of the order dated
21 October 2022. Similarly, suspended director of Shaila Clubs -Mr.
Amit Prabhakar Kore has filed Review Petition No.85 of 2024 seeking
review of the order dated 21 October 2022.
C. SUBMISSIONS 11) Mr. Seervai, the learned senior advocate appearing for the
Bank through the Liquidator would submit that the order dated 21
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October 2022 passed by this Court based on Minutes of Order dated
20 October 2022 is ex facie erroneous and deserves to be recalled. He
would submit that the compromise sought to be entered into between
the Bank and Savannah vide Minutes of Order dated 20 October 2022
is not lawful. He would submit that the Minutes of Order were filed in
completely unrelated proceedings filed by Savannah challenging mere
Magistrate’s order for recovery of possession of Shaila Clubs property.
That Savannah is merely a conducting party in respect of the
premises of Shaila Clubs and did not otherwise have any authority to
settle the loan account of Shaila Clubs. That under the Minutes of
Order, Savannah is shown to have stepped into the shoes of the Bank
and became transferee of loan account of the Shaila Clubs by paying
paltry sum of Rs.87,92,000/-. That as on the date of filing of Minutes
of Order, the total dues of Shaila Clubs to the Bank were to the tune
of Rs.8,97,73,098/- whereas Savannah paid total amount of Rs.
3,37,92,000/- and has become transferee in respect of the loan account
with right to recover the entire loan amount from Savannah by
dealing with the mortgaged assets of Shaila Clubs. Mr. Seervai would
submit that under the Reserve Bank of India Directives, a private
party cannot be permitted to be a transferee in respect of NPA loan
account of a Bank. He would rely upon Reserve Bank of India
(Transfer of Loan Exposures) Directions, 2021 (RBI Directives)
issued under the provisions of Sections 21 and 35A of the Banking
Regulations Act, 1949 in support of his contention that the only
entities listed in Clause (3) of the RBI Directives could be recognised
and eligible transferees in respect of a loan account. That it is not
lawful for the Bank to transfer loan account in favour of a private
entity under the RBI Directives. He would also rely upon GR dated 6
June 2022 in support of his contention that under the OTS scheme
introduced vide said GR, it was not lawful to enter into arrangement
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of transfer of loan in favour of Savannah. He would submit that under
the provisions of Sections 21 and 35A of the Banking Regulation Act,
the RBI Directives are binding. He would rely upon judgment of Apex
Court in Sudhir Shantilal Mehta V/s. Central Bureau of
Investigation1 in support of his contention that Directives issued by
the RBI under Sections 21 and 35A of the Banking Regulation Act are
binding in nature. That since the Minutes of Order are in violation of
RBI Directives, the same are not lawful within the meaning of Order
XXIII Rule 3 of the Code of Civil Procedure, 1908 (the Code). That
since the compromise is not lawful, order recording compromise is
liable to be recalled.
12) Mr. Seervai would further submit that order dated 21
October 2022 is otherwise required to be recalled in view of ratio of
the judgment of the Apex Court in Ajay Ishwar Ghute and others
V/s. Meher K. Patel and others2 wherein the Apex Court has
adversely commented upon practice followed in this Court in passing
orders based on Minutes of Order. He would also rely upon the
judgment of the Apex Court in Suleman Noormohamed and Ors.
V/s. Umarbhai Janubhai3 in support of his contention that if the
Judge does not record satisfaction about lawful compromise, order
recording compromise can always be recalled.
13) Mr. Seervai would submit that the Liquidator has locus to
maintain the present application and that mere expiry of term of
Liquidator under Section 109 of the MCS Act does not mean that the
Liquidator cannot maintain the present proceedings. He would submit
that until submission of report by the Liquidator, the liquidation
1
(2009) 8 SCC 1
2
2024 SCCOnLine SC 681
3
(1978) 2 SCC 179
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proceedings do to terminate. In support of his contention, he would
rely upon judgment of the Apex Court in Goa State Cooperative
Bank Limited V/s. Krishna Nath A. (dead)through legal
representatives and others4. He would submit that Liquidator is yet
to submit his final report and therefore its mandate has still not come
to an end. He would further submit that Bank’s application for recall
of order dated 21 October 2022 cannot be dismissed only for the
reason of delay in filing the same. He would submit that mere delay,
not involving latches, acquiescence or estoppel, would not prevent this
Court from exercising inherent power of recalling its order. That
inherent power of recall of order need not be conferred and cannot be
circumscribed by considerations of delay. In support of his contention,
he would rely upon the following judgments:
(i) Annada Prasad Mitra V/s. Sushil Kumar Mandal5
(ii) Somar Bhuiya and Ors. V/s. Kapil Kumar Gautam
and Ors.6
(iii) Pooranchand Mulchand Jain V/s. Komalchand
Beniprasad Jain7
(iv) M.M. Thomas V/s. State of Kerala and Another8
(v) State of Maharashtra V/s. Digambar9
14) Mr. Seervai would further submit that Savannah has
admitted in the Affidavit-in-Reply that it is not an eligible transferee
for transfer of loan under the RBI Guidelines. That Savannah’s claim
of Liquidator taking independent commercial decision of entering into4
(2019) 20 SCC 38
5
1941 SCC OnLine Cal 210
6
1974 SCC OnLine Pat 95
7
1961 SCC OnLine MP 74
8
(2000) 1 SCC 666
9
(1995) 4 SCC 683Page No. 11 of 51
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transfer of loan to any eligible transferee, which is completely
unlawful. Mr. Seervai would accordingly pray for recall of the order
dated 21 October 2022.
15) Mr. Nankani, the learned Senior Advocate appearing for
Petitioner in Review Petition No.85 of 2022 would adopt the
submissions of Mr. Seervai. Additionally, he would submit that the
Minutes of Order dated 20 October 2022 travelled outside the scope of
Writ Petition No.11610 of 2022, in which there was no issue of
determination of liability of Shaila Clubs towards the Bank. In an
unconnected Petition filed by the Conductor for protecting possession
of property under its management, the liability of Shaila Clubs
towards the Bank could not be settled by filing Minutes of Order. That
the Minutes of Order have thus slipped in by a sleight of hand by
using pendency of unconnected Petition. He would submit that the
Shaila Clubs has not signed Minutes of Order and therefore
arrangement between the Bank and Shaila Clubs would not bind
Shaila Clubs. He would submit that since the Minutes of Order affect
rights of parties, who has not signed the same, the same are unlawful
and liable to be recalled. He would submit that mere presence of
Advocate of Shaila Clubs at the time of passing of order dated 21
October 2022 would not mean that Shaila Clubs has consented to
disposal of the Petition in terms of Minutes of Order. He would
accordingly pray for review and recall of order dated 21 October 2022.
16) None has appeared on behalf of the Review Petitioner in
Review Petition No.38 of 2023 filed by Shaila Clubs, possibly on
account of the fact that Shaila Clubs is admitted in CIRP, and its
suspended director has already filed Review Petition No.85 of 2024.
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Dr. Tulzapurkar, the learned senior advocate appearing for Savannah.
He would submit that the Liquidator does not have locus standi to file
Interim Application No.13400 of 2024. That the Bank has been under
liquidation since 7 January 2009 and under provisions of Section 109
of the MCS Act, the liquidation proceedings has come to an end on 12
February 2022. That therefore, the Liquidator did not have locus
standi to file Interim Application No.13400 of 2024 on 21 August
2022. He would rely upon provisions of sub-rule (17) of Rule 89 of the
Maharashtra Co-operative Society Rules, 1961 (MCS Rules) in
support of his contention that after expiry of period of liquidation, the
assets, actionable claims, etc. vests in the Registrar, who can appoint
either custodian or receiver to realise the remaining assets and
actionable claim. That only custodian or receiver can sue or defend
any disputes at the end of liquidation proceedings. He would rely upon
judgment of this Court in Ashok Kisanrao Hande and Anr. V/s.
The State of Maharashtra and Ors.10
18) In support of his contention that the maximum period
prescribed under Section 109 of the MCS Act cannot be extended
under any circumstances, he would submit that the judgment of the
Apex Court in Goa State Cooperative Bank Limited (supra) is
clearly distinguishable as the same involved the issue of right of the
Bank to continue with recovery proceedings from defaulting members
upon completion of period of liquidation. That in the present case,
such right can be exercised only by Registrar himself or by custodian
or receiver appointed by him. That in any case, the Liquidator does
10
Writ Petition No.5215 of 2012, decided on 25 March 2019.
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not have authority to represent the Bank and file the instant Interim
Application.
19) Dr. Tulzapurkar would further submit that there is
absolutely nothing illegal or unlawful in the arrangement agreed
between the Bank and Savannah. That the Liquidator of the Bank
has taken independent commercial decision to close its loan account
by accepting amount of Rs.87,92,000/- from Savannah. He would
invite my attention to the offer made by the Liquidator to Savannah
vide letter dated 6 August 2022. He would submit that the RBI
Directives have absolutely no application to the facts of the present
case. That the said directives are applicable only in respect of NPA or
stressed assets. That there is nothing on record to indicate that the
loan account of Shaila Clubs was classified as ‘stressed asset’. That
even the GR dated 6 June 2022 does not apply to non-NPA or non-
stressed asset. He would submit that the directives of the RBI or GR
issued on 6 June 2022 cannot take away the right of the Liquidator to
realise the assets of the Bank.
20) Dr. Tulzapurkar would further submit that so far as the
Bank is concerned, it was ready to close loan account of Shaila Clubs
on acceptance of amount of Rs.87,92,000/-. That the Bank need not
really be concerned about purchase of loan by Savannah or Savannah
filing proceedings for recovery of loan amount from Shaila Clubs. That
these are independent proceedings between Savannah and Shaila
Clubs with which the Bank does not have any concern. Whether the
purchase transaction of loan by Savannah from the Bank is valid or
not can be determined in CIRP pending before the NCLT through
objection filed by Shaila Clubs and the same cannot be a reason for
recall of order passed by this Court on 21 October 2022.
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order are entered into on the basis of voluntary offer made by
Liquidator in pursuance of OTS scheme declared by the State
Government. That Savannah never approached the Liquidator with
any offer to purchase loan account of Shaila Clubs. That Savannah
made a counter offer to the Bank for purchase of loan account of
Shaila Clubs as a pre-condition for payment of desired amount at
which the Bank was ready to settle the loan account. That Savannah
has ultimately paid amount of Rs.3,37,92,000/- to the Bank for
discharge of liability of Shaila Clubs though Savannah itself did not
avail any credit facility from the Bank. That having spent an amount
of Rs.3.37 crores, Savannah otherwise is lawfully entitled to recover
the said amount from Shaila Clubs through the mortgaged assets. Dr.
Tulzapurkar would submit that since there is no illegality in the
compromise, the application for recall as well as review of order dated
21 October 2022 deserve to be dismissed. He would submit that
interim application for recall as well as review petition of suspended
director of Shaila Clubs otherwise suffer from gross delay and on that
ground alone, they are liable to be dismissed.
22) In rejoinder, Mr. Seervai would submit that admittedly in
the present case, no formal order is passed as mandated under
Section 109 of the MCS Act by Registrar for termination of liquidation
proceedings and discharging the Liquidator. That the Liquidator
therefore continues to be incharge of the Bank. That the liquidator
has various statutory and other duties qua the Applicant as set out in
Section 105 of the MCS Act. He would further submit that the
judgments cited by the Dr. Tulzapurkar are only on the point of period
of liquidation of 15 years being mandatory and not on authority for
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the proposition that liquidation proceedings stand terminated without
an order of the Registrar under Section 109 of the MCS Act. That the
deeming fiction under Section 109 of the MCS Act can apply only once
an actual order of the Registrar is passed for termination of
liquidation proceedings; thereafter, it will be deemed that liquidation
proceedings stand terminated on the expiry of the 15 year period from
the date the Liquidator took charge of the assets of the insolvent.
23) Mr. Seervai would further submit that the RBI Directives
read as a whole and in particular Clauses 9(e), 9(l), 9(m), 9(n) and 54
clearly indicate that they apply to all types of loans transfers and not
only to stressed loans. That it is not disputed that Shaila Clubs was
classified as a NPA in February 2012. That the Prudential Framework
Directions cannot be relied upon to interpret the RBI Directions relied
upon by the Bank, which have to be interpreted on a reading of the
document as a whole.
24) Mr. Seervai would further submit that the RBI Directions
have statutory force and govern every transaction of assignment of
debt including co-operative banks. The impugned order takes on
record the minutes of order between the Bank and Savannah which
envisages an impermissible and illegal assignment of debt owed by
Shaila Clubs by a cooperative bank (Applicant-Bank) to an admittedly
legally unqualified entity being Savannah. Hence, every transaction of
assignment of debt is governed by the RBI Directions.
D. REASONS AND ANALYSIS 25) The Interim Application filed by the Bank through the
Liquidator as well as the Review Petitions filed by Shaila Clubs and
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its suspended director are all aimed at seeking recall or review of
order dated 21 October 2022 by which Writ Petition No.11610 of 2022
came to be disposed of by this Court. It would therefore be necessary
to reproduce the Order passed by this Court on 21 October 2022, of
which recall/review is sought. Order dated 21 October 2022 passed in
Writ Petition No.11610 of 2022 reads thus:
1. Petitioner and respondents no.1 and 2 are present in the Court.
Dispute is settled between the parties. They have signed Minutes of
Order dated 20th October, 2022. The same is taken on record and
marked “X-1” for identification.
2. Parties are identified by their respective Advocates. In terms of
the Minutes of Order, respondent no.2 has agreed to issue “No-Dues
Certificate” to the petitioner. In view of this, nothing survives in the
petition. The petition is disposed of in terms of the Minutes of Order.
3. Leave to amend. Amendment to be carried out forthwith.
26) Since Writ Petition No.11610 of 2022 is disposed of in
terms of Minutes of Order dated 20 October 2022, it would be apposite
to reproduce the said Minutes as well-
MINUTES OF ORDER
1. The Petitioner and Respondent No. 1 and 2 have settled their disputes
out of Court.
2. By an order dated 28th of July 2022, the learned Deputy Registrar (Ur-
ban Banks), Cooperative Societies, Maharashtra State, Pune, has ex-
tended the application of the One Time Settlement Scheme dated 6 th of
June 2022 to the Respondent No. 2 Bank. Accordingly, among other de-
faulters, Respondent No. 2 has offered the benefits of the same to Re-
spondent No. 3 as also to the Petitioner since the Petitioner is in posses-
sion of the Premises. As against the actual dues of INR 8,97,73,098/- as
of today, after the credit of INR. 2,50,00,000/- by the Petitioner under or-
ders passed by this Hon’ble Court, the Petitioner has offered to deposit a
further sum of INR. 87,92,000/-only.
3. 3. Accordingly, the Petitioner has paid to the Respondent No. 2 amounts
towards regularisation of NPA loan amount of Respondent.
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A. Bankers Cheque No. 920861 dated 2 nd September 2022 drawn on SBI
Bandra West branch in favour of the Respondent No. 2 for an amount of
INR 77,16,350/-; and
B. Bankers Cheque No. 920864 dated 3 rd September 2022 drawn on SBI
Bandra West branch in favour of the Respondent No. 2 for an amount of
INR 10,75,000/-.
4. Subject to realisation of the instruments as aforesaid in paragraph no. 3
hitherto, the Respondent No. 2 has assigned the loan account of Respon-
dent No. 3 alongwith all rights and securities, mortgages, charges,
remedies and benefits attached thereto, as a secured loan, in favour of
the Petitioner. The formal “No Dues” certificate shall be issued by Re-
spondent No. 2 within a period of one week from the date of credit of the
amount of INR. 87,92,000/- into its account. Respondent No. 2 will issue
No Objection Certificate regarding any decision of assignment or any
other relief to the Petitioner by the Resolution Professional in his juris-
diction.
5. The cause of action for the petition, having come to an end, the Peti –
tioner seeks leave to withdraw the present Writ Petition, in terms of the
present order.
6. The Petitioner seeks liberty to adjust its equities qua the sums of money
as referred to in paragraph no. 2 hereinabove as against the Respon-
dents No. 3 to 8 and/or their creditors in the pending litigation/s be-
tween them inter se and/or otherwise. The Petitioner is at liberty to do
so, in accordance with law.
7. The Writ Petition is accordingly disposed of, with no orders as to cost.
27) Before proceeding to decide whether the compromise
recorded vide Minutes of Order dated 20 October 2022 is lawful or
not, it would be necessary to examine the background in which Writ
Petition No.11610 of 2022 came to be filed by Savannah. As observed
above, the Bank had secured recovery certificate against Shaila Clubs
under Section 101 of the MCS Act and towards execution of the said
recovery certificate, the Special Recovery Officer of the Bank had filed
application before the Chief Metropolitan Magistrate, Esplanade,
Mumbai for physical possession of Shaila Clubs’ property at Bandra.
The learned Magistrate allowed the application filed by the Bank and
authorised recovery officer to take possession of Shaila Clubs’
property at Bandra vide Order dated 22 October 2018. Savannah, who
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initially filed Writ Petition No. 14517 of 2018 in this Court for stalling
recovery of Shaila Clubs’ property, later filed application before the
learned Magistrate seeking recall of Order dated 22 October 2018.
After its recall application was rejected by the learned Magistrate by
order dated 19 June 2019, Savannah filed Writ Petition No.7542 of
2019 in this Court and deposited amount of Rs.2,00,00,000/- with the
Liquidator. Earlier Savannah had deposited amount of Rs. 50,00,000/-
in Writ Petition No.14517 of 2018. This is how Savannah deposited
total amount of Rs.2.50 crores with the Liquidator for the purpose of
protecting its possession of Shaila Clubs’ property.
28) As observed above, Savannah is not the owner of Shaila
Clubs’ property but was armed with merely a Conducting Agreement
executed in its favour by Shaila Clubs and had right to manage Shaila
Clubs’ property for 15 years upto November 2022. For protecting
property of the Club under its management, Savannah paid amount
of Rs. 2.50 Crores to the Liquidator, which was actually supposed to
be paid by Shaila Clubs. Savannah succeeded in Writ Petition
No.7542 of 2019 and proceedings were remanded before the learned
Magistrate for being decided afresh. The learned Magistrate however,
refused to recall earlier order dated 22 October 2018 by its order dated
4 March 2020. The order dated 4 March 2020 was the subject matter
of challenge in Writ Petition No.11610 of 2022.
29) Thus, what Savannah challenged before this Court in
Writ Petition No.11610 of 2022 was the correctness of order passed by
the learned Magistrate on 4 March 2020 refusing to recall the order
dated 22 October 2018. If Writ Petition No.11610 of 2022 was to be
dismissed, Savannah would have lost possession of Shaila Clubs’
property and Liquidator would have recovered the possession and sold
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the Clubs’ Property for recovery of outstanding loan amount. During
pendency of Writ Petition No.11610 of 2022, the Government of
Maharashtra issued GR dated 6 June 2022 sanctioning OTS loan
repayment scheme for urban co-operative banks. The Liquidator, who
was attempting to recover the unrealised assets of the Bank for over
13 years, made an offer to Savannah on 6 August 2022, which reads
thus:
जावक क्र.: जा.क्र. व्हीएसएसबी/वसुली विवभाग/२०२२-२३/५८/१९३
प्रति , वि नांक :०६/०८/२०२२
मा. मॅनेजिंजग डायरेक्टर,
मे. सावनाह लाईफस्टाईल प्रा.लिल.,
विहल रोड, बांद्रा (पति0म),
मुंबई – ४०० ०५०विवषय :- एकरक्कमी कज5 पर फेडीबाब …
उपरोक्त विवषयास अनुसरून आपणास कळविवण्या ये े की, आमचे बँकेने शाखा ना. म. जोशी माग5 ,
मुंबई येथून कज5 ार मे. शैला क्लब् अँड रिरसॉट5 प्रा.लिल. यांना व्यवसायासाठी ारणी मध्यम मु कज5
रक्कम रू.४,७५,००,०००/- इ के अ ा केलेले आहे. बँकेने स र फम5 कडू न वसुली ाखल्यानुसार
कज5 वसुलीचे काम करी अस ाना मे. शैला बलब अँड रिरसॉट5 प्रा.लिल. हे हॉटेल आपण चालविवण्यास
घे ले आहे असे समजुन आले. त्यापुढेही बँकेने वसुलीची कारवाई चालू ठे वलेली हो ी.
मे. शैला क्लब अँड रिरसॉट5 प्रा.लिल. यांना बँकेने हॉटेल जप्ती करणार असलेची नोटीस वि ली. त्यानं र
स रचे हॉटेल आपण चालव असलेने मे. शैला क्लब अँड रिरसॉट5 प्रा.लिल. आणिण बँकेस या ाव्या
पाटT करून मे. हाय कोट5 मुब ं ई येथे आपण ावा ाखल केलेला आहे. या ाव्या ील विनकालाप्रमाणे
आपण वेळोवेळी मे. शैला क्लब अँड रिरसॉट5 प्रा.लिल यांचे बँकेच्या कज5 खा ेवर जवळपास रू.२.५०
कोटी इ की रक्कम जमा केलेली आहे.
बँकेस मा. सहकार आयुक्त व विनबंधकसो, सहकारी संस्था, महाराष्ट्र राज्य, पुणे यांचे काया5लयाकडील
वि .२८/०७/२०२२ रोजीचे एकरक्कमी कज5 पर फेड योजना लागू झालेली आहे . त्याप्रमाणे होणारी
रक्कम रू.७७,१६.३५०/-(अक्षरी रू. सत्याहत्तर लक्ष सोळा हजार ति नशे पन्नास मात्र) इ की रक्कम
बँकेच्या मे. शैला क्लब अँड रिरसॉट5 प्रा.लिल यांच्या कज5 खा ी कज5 ाराच्या व ीने रक्कम जमा करू
शक ा. बँक अवसायना जावून १३ वष_ पुण5 झालेली आहे . ठे वी ारांची ठे व रक्कम लवकरा लवकर
पर करणे आवश्यक आहे. त्यामुळे आपण कज5 ाराच्या व ीने रक्कम जमा करून कज5 खा े विनरंक
करावे.
विटप :- यापुवT आपण कोट5 आ शे ाप्रमाणे कज5 खा ेवर रक्कम जमा केली असलेने आपणास विवनं ी बजा
हे पत्र ेणे ये आहे. स रचे पत्र काय शे ीर स्वरूपाचे समजण्या येऊ नये.
सौ. स्मृ ी पाटील
अवसायक
वसं ा ा शे करी सहकारी बँक लिल., सांगली
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The English translation of letter dated 6 August 2022 is
produced by the Applicant as under:
Outward No. VSSB/Recovery Department/2022-23/58/58/193
Date: 06.08.2022To
The Managing Director,
M/s. Savannah Lifestyle Pvt. Ltd.,
Hill Road, Bandra (West),
Mumbai 400 050.
Subject: Lump sum loan repayment regarding…
In pursuance to the above subject you are being informed that, our Bank,
branch N.M. Joshi Marg, Mumbai has paid M/s. Shaila Club & Resort Pvt.
Ltd. A medium term loan of Rs. 4,75,00,000/- on hypothecation for business.
While the work of recovery of loan from the said firm was being carried out
by the bank as per Recovery Certificate, it is come to be known that you
have taken the hotel M/s. Shaila Club & Resort Pvt. Ltd. For running it.
Even after that the bank had continued the action of recovery.
The bank had given M/s. Shaila Club & Resort Pvt. Ltd. a seizure notice.
Thereafter, as the said hotel was being run by you, you have filed a suit in
Hon. High Court, Mumbai by making M/s. Shaila Club & Resorts Pvt. Ltd.
and the bank as parties in the suit. As per the decree in the suit, you have
deposited an approximate amount of Rs. 2.50 crores on the bank loan of
M/s. Shaila Club & Resorts Pvt. Ltd.
The lump sum loan repayment has been implemented on the bank on
27.07.2022 by the office of the Co-operative Commissioner and Registrar,
Co-operative Societies, Maharashtra State, Pune. According to that the
amount of Rs. 77,16,350/- (Rs, seventy seven lakhs sixteen thousand three
hundred fifty only) can be deposited on behalf of the borrower in its bank
account of M/s. Shaila Club & Resorts Pvt. Ltd. 13 years have completed for
the bank going into liquidation. It is necessary to return the amount of
depositors as early as possible. Therefore, by depositing the amount on
behalf of the borrower, clear the loan account.
PS: As you have earlier deposited the amount on the loan account as per the
order of the court, you are being given this request letter. This letter should
not be taken as legal in nature.
Sd/-
Mrs. Smruti Patil
Liquidator
Vasantdada Shetkari Sahakari Bank Ltd,
Sangli
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30) Savannah expressed willingness to pay amount of
Rs.77,16,350/- suggested by the Liquidator but did not agree for
closure of the loan account. Savannah instead requested the Bank to
assign loan with all securities, rights and benefits to it. The counter
offer made by Savannah reads thus:
Date: 11/08/2022
To.
The Official Liquidator
Vasantdada Shetkari Sahakari Bank,
Sangli Miraj Road,
Sangli-416 416
Email: [email protected]Kind Attn: Ms. Smruti Patil (Liquidator)
Dear Madam,
Sub.: Reply to your letter dated 6 th August 2022 addressed to
Savannah Lifestyle Private Limited.
We are in receipt of your letter dated 6 th August 2022 (“the said Letter”)
with regards to lumpsum repayment of the loan of Shaila Clubs and Resorts
Private Limited:
1. Vide your letter dated 6 th August 2022 (“the said Letter”) you have
informed us that pursuant to the scheme of lumpsum repayment of
loan, an amount of INR 77,16,350/- (Rupees Seventy-Seven Lakhs
Sixteen Thousand Three Hundred and Fifty Only) can be paid to-
wards the outstanding loan amount payable by Shaila Clubs and Re-
sorts Private Limited to close the loan account of Shaila Clubs and
Resorts Private Limited.
2. Since we are in possession of the club premises and are conducting
our business from there, you have offered to us to make the payment
of INR 77,16,350/- (Rupees Seventy-Seven Lakhs Sixteen Thousand
Three Hundred and Fifty Only) towards the outstanding loan ac-
count of Shaila Clubs and Resorts Private Limited. You have also
confirmed to us that the amount of INR 2 Crores 50 Lakhs paid/ de-
posited by Savannah Lifestyle Private Limited pursuant to Writ Peti-
tion Nos. 14517 of 2018 and 7542 of 2019 have been adjusted by your
Bank in the loan account of Shaila Clubs and Resorts Private Lim-
ited.
3. You have further informed us that Vasantdada Shetkari Sahakari
Bank Limited has been in liquidation for more than 13 years now
and therefore it has become necessary to make payments to the cred-
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itors of the Bank, hence the offer from you to us to make the pay-
ment of the said amount.
4. We wish to hereby convey our acceptance of the offer made by you
vide the said letter and are willing to make payment of the said
amount of INR 77,16.350/- (Rupees Seventy-Seven Lakhs Sixteen
Thousand Three Hundred and Fifty Only) either directly through us
or through any third party. We however request you not to close the
loan account of Shaila Clubs and Resorts Private Limited but assign
the loan along with all security, rights and benefits to Savannah
Lifestyle Private Limited or to such third party who makes payment
to you and subrogate Savannah Lifestyle or such third party in place
and stead of the bank along with all security held and rights in rela-
tion to the said loan account including but not limited to the charge
on the club premises and other assets of Shaila Clubs.
5. Since Shaila Clubs and Resorts Private Limited is unable to repay
the amount due to your Bank, a Recovery Certificate came to be is-
sued on 23rd February 2012 by the Deputy Registrar, Co-operative
Societies, State of Maharashtra, against Shaila Clubs and Resorts
Private Limited for an amount of INR 5,11,51,489 (Indian Rupees
Five Crores Eleven Lakhs Fifty-One Thousand Four Hundred
Eighty-Nine) under which your Bank was entitled to execute the Re-
covery Certificate and recover its outstanding dues from Shaila
Clubs and Resorts Private Limited. We request you to kindly cooper-
ate in executing necessary documents or making an application to
the relevant authorities for transfer of the said Recovery Certificate
in favour of Savannah Lifestyle or the said third party along with the
charge on the club premises.
6. We can also file Consent Terms in Writ Petition No. 5289 of 2020
which has been filed by Savannah Lifestyle Private Limited, before
the Hon’ble Bombay High Court.
7. Awaiting your confirmation of the aforesaid, we shall proceed with
depositing the said amount with your Bank by way of Demand Draft
as per the offer made by your Bank vide letter dated 06/08/2022 in
the said letter.
Sincerely,
Savannah Lifestyle Private Limited
Managing Director
31) It appears that the Liquidator of the Bank accepted the
counter offer made by Savannah and this is how the Minutes of Order
dated 20 October 2022 were drafted and signed by the Liquidator and
Savannah. Under the Minutes of Order, Savannah paid slightly higher
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amount of Rs.87,92,000/- to the Bank. As observed above, Savannah
had already paid amount of Rs.2.50 crores in the loan account of
Shaila Clubs. This is how total amount paid by Savannah in the loan
account of Shaila Clubs became Rs.3,37,92,000/-. Upon receipt of the
said amount, the Bank assigned the loan account of Shaila Clubs
alongwith all rights, securities, mortgages, charges, remedies and
benefits attached thereto as a secured loan in favour of Savannah.
Savannah sought liberty to adjust its equities qua the sum paid to the
Bank against Shaila Clubs and their other creditors in pending
litigations or otherwise. Savannah was granted liberty to do so in
accordance with law. This Court took on record the Minutes of Order
dated 20 October 2022 and disposed of Writ Petition No. 11610 of
2022 in terms of thereof.
32) Mr. Amit Prabhakar Kore (now a suspended director of
Shaila Clubs) raised objection to the said Minutes of Order vide letter
dated 17 November 2022 which reads thus:
17th November 2022
To,
Liquidator
Vasantdada Shetkari Sahakari Bank Ltd. (“the Bank”)
Sangli, MaharashtraDear Madam,
Sub : One Time Settlement (OTS) of Shaila Clubs and Resorts Pvt.
Ltd.
Re : Intervention Application in NCLAT CA AT Insolvency No. 1042 of
2021 dated 16.11.2021
1. As you are aware, the erstwhile Directors of Shaila Clubs and Resorts
Pvt. Ltd. (the Corporate Debtor in the captioned Intervention Application)
(hereinafter, “Shaila Clubs”) have challenged the Order dated 29 th October,
2021 passed by the Hon’ble NCLT, admitting the company into the CIRPPage No. 24 of 51
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Appeal No. (AT) (Insolvency) No. 1042/2021) (“the NCLAT Appeal”).
2. Your Intervention Application in the NCLAT Appeal dated 16.11.2021
was served on us yesterday, and we were shocked to find out that the OTS of
Shaila Clubs has been completed without even informing the promoters /
erstwhile directors of Shaila Clubs. Please do note that you are mandated to
make the Corporate Debtor, i.e. Shaila Clubs, a party to any such OTS
particularly given that Shaila Clubs is the “Borrower” under the loan
documents and the erstwhile directors who are the Guarantor/s of the loan
availed from Bank. It has now been brought to our notice, vide the
captioned Intervention Application, that the OTS has been concluded with
Savannah Lifestyle Private Limited (“Savannah Lifestyle”), a third party
who has absolutely nothing to do with the loan availed of by Shaila Clubs.
As you are well aware, the Company, i.e. Shaila Clubs, despite being a
necessary party, was not even a party to the proceedings in the Bombay
High Court.
3. In fact, it is due to Savanna Lifestyle defaulting on its obligations under
its Conducting Agreement with Shaila Clubs, and their illegal occupation of
the Shaila Clubs’ property, that Shaila Clubs’ account has become an NPA.
You are well aware of the aforesaid, given the fact that Shaila Clubs, as well
as the Bank, have had several litigations with Savannah Lifestyle over the
past 15 years and against whom there is an FIR registered for forgery of a
document for gaining illegal admission into the Committee of Creditors.
4. Given the above, the erstwhile Directors of Shaila Clubs have been
constrained to take several steps in law in order to protect illegal occupation
of the property as well as the other Financial Creditors, including the Bank,
from the fraudulent claims of Savannah Lifestyle. In such circumstances, it
is baffling to note that your good office has proceeded to engage with
Savannah Lifestyle and agreed to an OTS with Savannah Lifestyle, by
intentionally excluding Shaila Clubs. The ulterior motives of all concerned
and the male fide acts/omissions of the parties to this scheme are very
evident, and not far to seek.
5. In view of the aforesaid, we hereby call upon you to refrain from taking
the following steps –
a. exchanging communication with any other outside / third party,
other than the Resolution Professional (RP) or the erstwhile
Directors of the Corporate Debtor /guarantors of the Bank, for the
limits sanctioned to Shaila Clubs with regard to the OTS at your
Bank. Further, and in any event, to keep the RP and the
undersigned and the other erstwhile Directors copied on all
communications.
b. releasing any of the original property papers (Original Deed of
conveyance de 27th day of May 2005 is in custody of the Bank) or
selling any of the properties to any third party until the matter is
decided by the Hon’ble NCLT/NCLAT.
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c. subrogating the rights of the Bank to any other party either in the
COC or over the property,
d. calling any further meetings of the CoC and/or pass any
resolutions in relation to the CIRP process until the matter is
decided by the Hon’ble NCLT/NCLAT.
6. Request you to submit a copy of all correspondence, submissions to
Savannah, the Hon’ble High Court of Maharashtra, Hon’ble NCLT, Hon’ble
NCLAT or any other legal authority for us take the appropriate legal
remedies.
7. In the event you fail to comply with the aforesaid, the erstwhile Directors
of the Corporate Debtor shall be constrained to initiate appropriate legal
proceedings as advised, entirely at your risk as to the costs and
consequences thereof, which please do note. Needless to state, the above
communication is without prejudice to our rights under law and / or
otherwise. We hereby reserve our rights to take appropriate steps to remedy
the situation and the prejudice caused to Shaila Clubs.
Yours Truly,
Amit Kore
Erstwhile Director of Shaila Clubs and Resorts Private Limited
33) On account of raising of objection by Shaila Clubs, the
Liquidator of the Bank decided to resile from the compromise
executed with Savannah and sent letter dated 18 November 2022 to
the Managing Director of Savannah which reads thus:
जावक क्र. : जा.क्र.व्हीएसएसबी/वसुली विवभाग/२०२२-२३/५८/१८२ वि नांक : १८/११/२०२२
प्रति ,
मा. मॅनेजिंजग डायरेक्टर,
ने. सावनाह लाईफस्टाईल प्रा.लिल..
१६४ विहल रोड, बांद्रा (पति0म),
मुंबई – ४०० ०५०विवषय :- बँकेचे कज5 ार मे. शैला क्लब प्रा.लिल. यांचे खा ेवर आपले माफ5 OTS ची भरणा
झालेली रक्कम पर केलेबाब ….
सं भ5 :- मे, शैला क्लब अँड रिरसॉट5 स् प्रा.लिल. संचालक अविम प्रभाकर कोरे यांचा
वि .१७/११/२०२२ रोजीचा हरक अज5 .
वरील सं भTय विवषयास अनुसरून आपणास कळविवण्या ये े की, आपण वर नमु केलेल्या
कज5 खा ेसाठी OTS प्रमाणे होणारी र.रू.७७,१६.३५०/- डी.डी.नं.९२०८६१ नं व
र.रू.१०,७५,०००/- डी.डी.नं.९२०८६४ व .रू.६५०/- RTGS ने जमा केलेल्या होत्या.
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परं ु, मे.शैला क्लब अँड रिरसॉट5 स् प्रा.लिल. हे बँकेकडील मुळ कज5 खा े आहे व त्याचे संचालक
अविम प्रभाकर कोरे यांनी वि .१७/११/२०२२ रोजी बँकेकडे स र कज5 खा ेबाब हरक नो विवली
आहे. श्री. अविम कोरे यांनी घे लेल्या आक्षेपामुळे आपणास स र कजा5चे बँकेने मंजूर केलेल्या एक
रक्कमी कज5 पर फेड योजने आपण अपात्र ठर आहा .
स रची रक्कम न्यायालयीन बाबTमध्ये अडकून राहणेची शक्य ा विनमा5ण झालेने अवसायक या
नात्याने महाराष्ट्र सहकारी संख्या अतिधविनयम १९६० मधील कलम १०५ व १०७ व अवसायकास
प्राप्त असलेल्या अतिधकारान्चये आपणास वि लेली OTS योजना वि .१८/११/२०२२ रोजीचे
बँकेकडील ठराव क्र. २ ने रद्द करणे ये आहे. त्यामुळे आपण भरलेली ने. शैला क्लब अँड रिरसॉट5 स्
प्रा.लिल. यांचे कजा5साठीची OTS ची रक्कम बैंक आपले कंपनीचे नांवाने स्टेट बैंक ऑफ इंडीया, मुंबई
वरील DD No.119938 र.रू.७७.१६.३५०/- ने व DD No.119937 ८.रू.१०,७५,०००/- व
DD No.119936 रू.६५०/- अशी एकूण र.रू.८७,९२,०००/- (अक्षरी र.रू. सत्याऐ ंशी लक्ष
ब्यान्नऊ हजार मात्र) इ की आपणास पर करण्या ये आहे.
री स र DD आपणास विमळाल्याची पोहोच ेण्या यावी.
सौ. स्मृ ी पोटील
अवसायक
वसं ा ा शे करी सहकारी बैंक लिल., सांगली
34) It is an admitted position that Savannah refused to accept
the Demand Drafts sought to be handed over to it by the Liquidator
alongwith letter dated 18 November 2022. The Liquidator thereafter
filed Affidavit dated 21 November 2022 in Writ Petition No.11610 of
2022, which was already disposed of, which reads thus:-
AFFIDAVIT OF THE RESPONDENT No. 1 & 2
I, Mrs. Smruti Narenra Patil, Age ____ years, the Liquidator of the
Respondent No. 1 herein do hereby state on solemn affirmation as follows.
1. The Respondent No. 3 is the borrower of the Respondent No. 1 Bank
(Now under liquidation). I say that the Petitioner claims to be the
lessee/licensee of the Respondent No.3 and in occupation of the
disputed property as such (which assertion the Respondent No. 1 &
2 do not admit as correct)
2. I say that the State Government has floated a “One Time
Settlement” Scheme for borrowers of various Institutions, which is
applied to the Respondent No. 1 Bank in liquidation
3. The Respondent No. 1 accordingly offered to the Respondent No. 3,
who is the borrower of the Respondent No. 1, the benefit of the said
Scheme. The Respondent No. 1 also offered to the Petitioner thePage No. 27 of 51
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premises which are mortgaged to Respondent No.1
4. The Petitioner came forward and accepted the terms of the said OTS
Scheme and offered to pay a sum of Rs. 87,92,000/- for the settlement
of the loan account of the Respondent No. 3. The Respondent No. 1
accepted the said offer of the Petitioner and entered consent terms,
based thereon, in the present Writ Petition. I crave leave to refer to
and rely upon the correct copy of the said consent terms and the
order of this Hon’ble Court dated 21 of October 2022 as and when
necessary.
5. I say that after the disposal of the present Writ Petition as aforesaid,
the Respondent No. 3 has objected to the acceptance of the offer of
the Petitioner to settle its loan account by letter dated 17 of
November 2022. Hereto annexed and marked as Annexure A – 1 is
the copy of the said letter dated 17 of November 2022.
6. After examination of the objections/letter dated 17 of November
2022, issued by the Respondent No. 3, the provisions of the law and
after examining the file in that context, I have come to a conclusion
that the decision to offer the benefit of the OTS Scheme to the
Petitioner was itself incorrect and thus the decision to enter consent
terms as aforesaid was also incorrect.
7. I say that I have decided to recall the benefits of the OTS Scheme to
the Petitioner as aforesaid by Resolution No. 2 of meeting dated 18 of
November 2022.
8. I say that the I have informed the Petitioner about the decision as
aforesaid by letter dated 18th of November 2022. The Demand Drafts
of the amount of Rs. 87,92,000/- are also enclosed with the said letter
and the amount is paid over to the Petitioner. Hereto annexed and
marked as Annexure A-2 is the copy of the letter dated 18 th of
November 2022 alongwith the copy of the demand drafts.
9. I say that since the order dated 21 of October 2022 is passed by this
Hon’ble Court on the basis of the arrangement as aforesaid, which
now stands altered, the Respondent No. 1 & 2 are humbly
submitting the said subsequent events on the record of this Hon’ble
Court, as duty bound.
Solemnly affirmed at Mumbai,
Dated this 21st day of November 2022. Deponent.
BEFORE ME.
Identified by me
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35) Coming back to the issue of legality of compromise, the
Bank has contended that the compromise entered into with Savannah
vide Minutes of Order dated 20 October 2022 is unlawful. Same stand
is adopted by the suspended director of Shaila Clubs. Here provisions
of Order XXIII Rule 3 of the Code would be relevant, which provides
thus:
3. Compromise of suit.
Where it is proved to the satisfaction of the Court that a suit has been
adjusted wholly or in part by any lawful agreement or compromise in
writing and signed by the parties, or where the defendant satisfies the
plaintiff In respect of the whole or any part of the subject-matter of the suit,
the Court shall order such agreement, compromise or satisfaction to be
recorded, and shall pass a decree in accordance therewith [so far as it
relates to the parties to the suit, whether or not the subject-matter of the
agreement, compromise or satisfaction is the same as the subject-matter of
the suit]:
Provided that where it is alleged by one party and denied by the other that
an adjustment or satisfaction has been arrived at, the Court shall decide the
question; but no adjournment shall be granted for the purpose of deciding
the question, unless the Court, for reasons to be recorded, thinks fit to grant
such adjournment.
Explanation. An agreement or compromise which is void or voidable under
the Indian Contract Act, 1872 (9 of 1872), shall not be deemed to be lawful
within the meaning of this rule.
36) Thus, the Court is required to record a satisfaction that
the Suit has been adjusted by a lawful agreement or compromise in
writing and signed by the parties. Thus, for compromise of a suit
under provisions of Order XXIII Rule 3 of the Code, the agreement or
compromise must be lawful. It is Bank’s contention that the
transaction of assignment of Shaila Clubs’ loan to Savannah is
unlawful and is prohibited by the RBI Directives.
37) Sections 21 of the Banking Regulation Act, 1949 (Act of
1949) confers power on the Reserve Bank of India to control advances
by the banking companies and provides thus:
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21. Power of Reserve Bank to control advances by banking
companies.-
(1) Where the Reserve Bank is satisfied that it is necessary or expedient in
the public interest [or in the interests of depositors] [or banking policy] so to
do, it may determine the policy in relation to advances to be followed by
banking companies generally or by any banking company in particular, and
when the policy has been so determined, all banking companies or the
banking company concerned, as the case may be, shall be bound to follow
the policy as so determined.
(2) Without prejudice to the generality of the power vested in the Reserve
Bank under sub-section (1), the Reserve Bank may give directions to
banking companies, either generally or to any banking company or group of
banking companies in particular, ³[as to-
(a) The purposes for which advances may or may not be made,
(b) The margins to be maintained in respect of secured advances,
(c) the maximum amount of advances or other financial accommodation
which, having regard to the paid-up capital, reserves and deposits of
a banking company and other relevant considerations, may be made
by that banking company to any one company, firm, association of
persons or individual,
(d) The maximum amount up to which, having regard to the considera-
tions referred to in clause ( c), guarantees may be given by a banking
company on behalf of any one company, firm, association of persons
or individual, and
(e) the rate of interest and other terms and conditions on which ad-
vances or other financial accommodation may be made or guarantees
may be given].
(3) Every banking company shall be bound to comply with any directions
given to it under this section.
38) Thus, under Section 21 of the Act of 1949, RBI is
empowered to give directions to the banking companies, which
becomes binding under provisions of sub-section (3) of Section 21 on
every banking company.
39) Under provisions of Section 35A, RBI has power to issue
directions to a banking company and provides thus :-
35-A. Power of the Reserve Bank to give directions. –
(1) Where the Reserve Bank is satisfied that-
(a) in the [public interest]; or
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(b) to prevent the affairs of any banking company being conducted in a
manner detrimental to the interests of the depositors or in a manner
prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally,
it is necessary to issue directions to banking companies generally or
to any banking company in particular, it may, from time to time,
issue such directions as it deems fit, and the banking companies or
the banking company, as the case may be, shall be bound to comply
with such directions.
(2) The Reserve Bank may, on representation made to it or on its own
motion, modify or cancel any direction issued under sub-section (1), and in
so modifying or cancelling any direction may impose such conditions as it
thinks fit, subject to which the modification or cancellation shall have effect.
40) In exercise of powers under Sections 21 and 35A of the
Act of 1949, RBI issued ‘Master Directions-Reserve Bank of India
(Transfer of Loan Exposure) Directions, 2021’ on 24 September 2021.
Under Clause 3 of the Directives, the same applies to various entities
enumerated therein, which are collectively referred to as ‘lenders’
throughout the Directives. Clause 3 of the Directives provides thus:
3. The provisions of these directions shall apply to the following entities
(collectively referred to as lenders in these directions), unless specified
otherwise:
(a) Scheduled Commercial Banks;
(b) Regional Rural Banks;
(c) Primary (Urban) Co-operative Banks/State Co-operative Banks/
Central Co-operative Banks;
(d) All India Financial Institutions (NABARD, NHB, EXIM Bank,
SIDBI and NaBFID);
(e) Small Finance Banks; and
(f) All Non Banking Finance Companies (NBFCs) including Housing
Finance Companies (HFCs).
41) Clause 9 of the Directives define various terms and
expressions and the term ‘permitted transferees’ has been defined
under Clause 9(h) as under:
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(h) “Permitted transferees” mean the lenders specified at sub-clauses
(a), (d), (e) and (f) of Clause 3:
42) The term ‘transfer’ and ‘transferee’ are defined under
Clauses 9(l) and 9(m) as under:
(l) “transfer” means a transfer of economic interest in loan exposures by the
transferor to the transferee(s), with or without the transfer of the
underlying loan contract, in the manner permitted in these directions;
Explanation: Consequently, the transferee(s) shall “acquire” the loan
exposures following a loan transfer.
(m) transferee” means the entity to which the economic interest in a loan
exposure is transferred under these directions;
Provided that a transferee shall not be a person disqualified in terms of
Section 29A of the Insolvency and Bankruptcy Code, 2016;
Provided further that in case of transfer of loan exposures of borrowers in
whose accounts instances of fraud have been detected by any lender, the
transferee(s) shall neither belong to the existing promoter group of such
borrower nor shall be a subsidiary / associate / related party etc. (domestic
as well as overseas) of any person belonging to the existing promoter group
of such borrower.
Explanation I: In market parlance, transferee may be alternatively referred
to as the assignee under assignment transactions and participant under
loan participations, wherever applicable.
Explanation II: For the purpose of the second proviso above, the term
‘promoter group’ shall have the same meaning as in the Securities and
Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2018; and the term ‘related party’ shall have the same
meaning as in the Insolvency and Bankruptcy Code, 2016.
Explanation III: The responsibility for verifying and establishing that the
transferee(s) comply with the above provisos shall be with the transferor(s).
43) Under Clause 54 of the Directives, the transfer of stressed
loans is permitted only to the permitted transferees and asset
reconstruction companies. Clause 54 reads thus:
54. In general, lenders shall transfer stressed loans, including through
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44) Thus, under the 2021 Directives issued by the RBI, the
lenders enumerated in Clause 3 thereof can transfer the stressed
assets only to the lenders specified under sub-clauses (a), (d), (e) and
(f) of Clause 3, which includes Scheduled Commercial Banks,
Financial Institutions, Small Finance Banks and NBFCs.
45) The term “stressed asset” is defined under Clause 9 (k) as
under:
(k) “stressed loans” mean loan exposures that are classified as non-
performing assets (NPA) or as special mention accounts (SMA);
46) Thus, under the Directives 2021 issued by the RBI, it was
impermissible for the Applicant-Bank to transfer the loan of Shaila
Clubs to any entity other than the ones enumerated in sub-clauses (a),
(d), (e) and (f) of Clause 3. This is the reason why the Applicant-Bank
as well as Shaila Clubs contend that the compromise entered into
between the Bank and the Savannah is in violation of the RBI
Directives and the same is therefore unlawful.
47) Dr. Tulzapurkar has fairly not disputed the position that
the 2021 Directives are applicable in respect of the Applicant-Bank
and that Savannah is not included as a recognized ‘lender’ under
Clause 3 of the Directives. Dr. Tulzapurkar has also fairly not
disputed the position that the RBI Directives issued under provisions
of Sections 21 and 35A of the Act of 1949 are binding and therefore, it
is not necessary to increase the length of this judgment by discussing
the ratio of judgment in Sudhir Shantilal Mehta (supra) which
reiterates the position that RBI Directives are binding. His case is
that the RBI Directives have no application in the present case.
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the present case is not governed by 2021 Directives issued by RBI. It
is sought to be suggested that the Directives apply only to ‘stressed
assets’ and that the same did not impinge upon Liquidator’s right of
realizing monies in respect of assets of a borrower. True it is that the
2021 Directives essentially apply to ‘stressed loans’ as defined under
Clause 9 (k) of the Directives, which includes loan exposure that are
classified as Non-Performing Assets or Special Mention Accounts.
However, Applicant-Bank has pleaded in paragraph 12 of the
Application that Shaila Clubs account was classified as NPA and this
assertion is not denied by Savannah in its Affidavit-in-Reply. In fact,
contents of paragraph No.12 are admitted by Savannah. Therefore,
the contention that RBI Directives 2021 do not apply to the loan
transactions of Shaila Clubs is stated only to be rejected.
49) Reliance is also placed on behalf of Savannah on Clause
11 of the Directives, which reads thus:
11. Loan transfers should result in transfer of economic interest
without being accompanied by any change in underlying terms and
conditions of the loan contract usually. In all cases, if there are any
modifications to terms and conditions of the loan contract during and
after transfer (eg. In take-out financing), the same shall be evaluated
against the definition of ‘restructuring’ provided in Paragraph 1 of
the Annex to the Reserve Bank of India (Prudential Framework for
Resolution of Stressed Assets) Directions 2019, dated June 7, 2019.
50) I fail to understand as to how reliance on Clause 11 of the
RBI directives assists the case of Savannah. All that Clause 11
provides is that loan transfer would result in transfer of economic
interest without being accompanied by any change in underlying
terms and conditions of the loan contract and in all cases where there
are any modifications in the terms and conditions of the loan contract
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during or after transfer, the same shall be evaluated against the
definition of the term “restructuring” provided in Paragraph No.1 of
the Annexure to Reserve Bank of India (Prudential Framework for
Resolution of Stressed Assets) Directions, 2019 dated 7 June 2019.
Dr. Tulzapurkar has placed on record copy of the said Prudential
Directions, 2019 which again does not assist the case of Savannah in
any manner. All that Clause 11 provides is that there would be no
change in the terms and conditions of loan contract upon transfer of
loan and whenever such terms or conditions are modified, the same
shall be evaluated against definition of the term ‘restructuring’ in
Prudential Directions. Thus, Prudential Directions apply for limited
purpose of definition of the term ‘restructuring’ that too when there
are modification of terms and conditions in loan agreement.
51) I am therefore of the view that the transaction of
assignment of loan of Shaila Clubs by the Bank in favour of Savannah
is specifically prohibited under the 2021 RBI Directives as Savannah
is not an eligible transferee. One of the objectives behind the RBI
Directives is to ensure that the Banks do not transfer loan accounts to
ineligible transferees. Otherwise, Banks would transfer loan accounts
to private money lenders. Since Savannah is not one of the recognized
transferees under the 2021 RBI guidelines, transfer of loan account of
Shaila Clubs in favour of Savannah would clearly be unlawful.
Therefore, the compromise entered into between the Bank and
Savannah is something which this Court could not have accepted for
the purpose of disposal of Writ Petition No.11610 of 2022
52) More glaring is the fact that the compromise executed
between the Bank and Savannah affects the interests of Shaila Clubs,
which is not signatory to the Minutes of Order. The effect of Minutes
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of Order is that upon a payment of amount of Rs.3.37 crores in the
loan account of Shaila Clubs, Savannah has secured right to recover
outstanding loan amount of Rs.8,97,73,093/- (as on 20 October 2022)
from Shaila Clubs. As observed above, Savannah is possessing a
valuable asset of Shaila Clubs being Club premises at Bandra in
Mumbai. By transfer of loan, it became mortgagee of the Club’s
property. On the basis of assignment of loan of Shaila Clubs in its
favour, Savannah has instituted CIRP against Shaila Clubs and would
ultimately realise the outstanding loan amount alienating the
property of Shaila Clubs. Thus, the Minutes of Order directly affect
the rights of Shaila Clubs. The objective behind RBI Directives of not
permitting ineligible lender to purchase NPA is totally frustrated in
the present case, where Savannah is actually eyeing to secure
ownership of property under its management as mere Conductor by
paying sum of Rs.3.37 crores in Shaila Clubs’ loan account. The
compromise effected between Bank and Savannah actually affects the
interest of Shaila Clubs, who is not the signatory to the compromise.
Mere presence of Advocate of Shaila Clubs before the Court on 21
October 2022 or failure on the part of the Advocate to raise any
objection to disposal of the petition in view of the Minutes of Order
would not convert unlawful compromise into lawful one.
53) Judgment of the Apex Court in Suleman
Noormohamed (supra) is relied upon by Mr. Seervai in support of his
contention of unlawful compromise. The Apex Court has dealt with
the issue of eviction for the tenant on the basis of compromise where
the tenant opposed execution of the decree on the ground that the
decree was nullity as the compromise, in absence of making out the
ground for eviction under rent control legislation, was itself unlawful.
The Apex Court held in paragraphs No. 8 as under:
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2. It is not necessary to review again and again all the earlier judgments of this
Court on the point. It will be sufficient to refer only to two, namely, Nagindas
Ramdas v. Dalpatram Ichharam alias Brijram [(1974) 1 SCC 242 : (1974) 2
SCR 544] — a judgment which is noticed by the High Court also in its order
under appeal and the case of Roshan Lal v. Madan Lal [(1975) 2 SCC 785 :
(1976) 1 SCR 878] .
3. It was pointed out in Nagindas case by one of us (Sarkaria, J.) that the
existence of one of the statutory grounds mentioned in Sections 12 and
13 of the Act, as in the case of other similar States Statutes, is a sine
qua non to the exercise of jurisdiction by the Rent Court in order to
enable it to make a decree for eviction. Parties by their consent cannot
confer jurisdiction on the Rent Court to do something which
according to the legislative mandate it could not do. The Court while
recording a compromise under Order 23 Rule 3 of the Code has to
satisfy itself that the agreement between the parties is lawful; in other
words is not contrary to the provisions of the Act. But it has been clearly
laid down in Nagindas case at p. 552 (SCC p. 251-52):
“… that if at the time of the passing of the decree, there was some material
before the Court, on the basis of which, the Court could be prima facie satisfied,
about the existence of a statutory ground for eviction, it will be presumed that
the Court was so satisfied and the decree for eviction, though apparently
passed on the basis of a compromise, would be valid. Such material may take
the shape either of evidence recorded or produced in the case, or, it may partly
or wholly be in the shape of an express or implied admission made in the
compromise agreement, itself…”
4. In Roshan Lal case, one of us (Untwalia, J.) following Nagindas
case reiterated the same view. At p. 882 delivering the judgment of this Court,
it has been said: (SCC p. 789)
“The Court can pass a decree on the basis of the compromise. In such a
situation the only thing to be seen is whether the compromise is in violation
of the requirement of the law. In other words, parties cannot be permitted to
have a tenant’s eviction merely by agreement without anything more. The
compromise must indicate either on its face or in the background of other
materials in the case that the tenant expressly or impliedly is agreeing to
suffer a decree for eviction because the landlord, in the circumstances, is
entitled to have such a decree under the law.”
With reference to the requirement of the law under Order 23 Rule 3 of the Code, it
has been observed further on the same page: (SCC p. 789)
“If the agreement or compromise for the eviction of the tenant is found, on
the facts of a particular case, to be in violation of a particular Rent
Restriction or Control Act, the Court would refuse to record the compromise
as it will not be a lawful agreement. If on the other hand, the Court is
satisfied on consideration of the terms of the compromise and, if necessary,
by considering them in the context of the pleadings and other materials in
the case, that the agreement is lawful, as in any other suit, so in an eviction
suit, the Court is bound to record the compromise and pass a decree in
accordance therewith. Passing a decree for eviction on adjudication of the
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requisite facts or on their admission in a compromise, either express or
implied, is not different.”
(emphasis added)
54) The Apex Court has adversely commented upon practice
followed in this Court disposing of matters by accepting the Minutes
of Order. In Ajay Ishwar Ghute (supra), the Court referred to its
judgment in Speed Ways Picture Pvt. Ltd. v. Union of India
(1996) 6 SCC 705 and held in paragraph Nos.16 to 20 as under:
16. Now, we deal with the concept of “Minutes of Order”, which is peculiar
only to the Bombay High Court. This Court, in the case of Speed Ways
Picture Pvt. Ltd. v. Union of India1 had an occasion to consider the practice
of passing orders in terms of “Minutes of Order”. Paragraphs 5 and 6 of the
said decision reads thus:
“5. The basis upon which the review petition was decided is, in our
view, not correct. Counsel for the appellants and the respondents put
it in writing that a judgment of this Court and a Full Bench
judgment of the High Court covered the matter. The writ petition in
that High Court could, therefore, not succeed. This could have been
orally stated and recorded by the Court. As a courtesy to the
Court, the practice of long standing is to put statements such
as these in writing in the form of “minutes of order” which
are tendered and on the basis of which the Court passes the
order: “Order in terms of minutes”. The signatures of counsel
upon “minutes of order” are intended for identification so as
to make the order binding upon the parties’ counsel
represented. An order in terms of minutes is an order in
invitum, not a consent order. It is appealable and may be
reviewed.
6. It would be a different matter if the order of the court was passed
on “Consent Terms”, i.e., on a statement above the signatures of
counsel which expressly stated it was “by consent”. The order of the
court in such event would read: “Order in terms of consent terms.”
(emphasis added)
17. As the order passed in terms of the “Minutes of Order” is an order in
invitum, when a document styled as “Minutes of Order” signed by the
advocates for the parties is tendered on record, the Court must first
examine whether it will be lawful to pass an order in terms of the “Minutes
of Order”. The Court must consider whether all necessary parties have been
impleaded to the proceedings in which the “Minutes of Order” have been
filed. The Court must consider whether third parties will be affected by the
order sought in terms of the “Minutes of Order”. If the Court is of the view
that necessary parties were not impleaded, the Court ought to allow the
petitioner to implead them. On the failure of the petitioner to implead
them, the Court must decline to pass an order of disposing of the petition in
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terms of the “Minutes of Order”. The reason is that an order of the Court
passed without hearing the necessary parties would be illegal. The Court
must remember that though the parties may say that they have agreed to
what is recorded in the “Minutes of Order”, the order passed by the Court
based on the “Minutes of Order” is not a consent order. It is an order in
invitum. Only if the Court is satisfied that an order in terms of the
“Minutes of the Order” would be legal, the Court can pass an order in terms
of the “Minutes of Order”. While passing an order in terms of the “Minutes
of Order”, the Court must record brief reasons indicating the application of
mind.
18. For the convenience of the Court and as a matter of courtesy, the
advocates draft “Minutes of Order” containing what could be incorporated
by the Court in its order. Perhaps this practice was evolved to save the time
of the Court. The advocates who sign and tender the “Minutes of Order”
have greater responsibility. Before they sign the “Minutes of the order”, the
advocates have an important duty to perform as officers of the Court to
consider whether the order they were proposing will be lawful. They cannot
mechanically sign the same. After all, they are the officers of the Court first
and the mouthpieces of their respective clients after that.
19. Even if parties file consent terms, while accepting the consent terms in
terms of Rule 3 of Order XXIII of the Civil Procedure Code, 1908, the Court
is duty-bound to look into the legality of the compromise. The Court has the
jurisdiction to decline to pass a consent order if the same is tainted with
illegality. However, an order passed by the Court in terms of compromise
recorded in the consent terms is a consent order which will not bind the
persons who were not parties to the consent terms unless they were
claiming through any of the parties to the consent terms.
20. We summarise our conclusions regarding the concept of the “Minutes of
Order” as follows:
a) The practice of filing “Minutes of Order” prevails in the Bombay
High Court. As a courtesy to the Court, the advocates appearing for
the parties to the proceedings tender “Minutes of Order” containing
what could be recorded by the Court in its order. The object is to
assist the Court;
b) An order passed in terms of the “Minutes of Order” tendered on
record by the advocates representing the parties to the proceedings is
not a consent order. It is an order in invitum for all purposes;
c) Before tendering the “Minutes of Order” to the Court, the
advocates must consider whether an order, if passed by the Court in
terms of the “Minutes of Order,” would be lawful. After “Minutes of
Order” is tendered before the Court, it is the duty of the Court to
decide whether an order passed in terms of the “Minutes of Order”
would be lawful. The Court must apply its mind whether the parties
who are likely to be affected by an order in terms of the “Minutes of
Order” have been impleaded to the proceedings;
d) If the Court is of the view that an order made in terms of the
“Minutes of Order” tendered by the advocates will not be lawful, the
Court should decline to pass an order in terms of the “Minutes of
Order”; andPage No. 39 of 51
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e) If the Court finds that all the parties likely to be affected by an
order in terms of the “Minutes of Order” are not parties to the
proceedings, the Court will be well advised to defer passing of the
order till all the necessary parties are impleaded to the proceedings.
(emphasis added)
55) Thus, Minutes of Order is an order in invitum and as held
by the Apex Court, before tendering the Minutes of Order to the
Court, the Advocates must consider whether the order, if passed by
the Court in terms of such Minutes, would be lawful. The Apex Court
has further held that it is duty of the Court to decide whether the
order passed in terms of the Minutes of Order would be lawful.
56) In the present case, the Minutes of Order are signed not
just by the Advocates but also by the Liquidator and Savannah. In
that sense, it actually travels beyond the scope of mere Minutes of
Order and partakes character of consent terms between the Bank and
Savannah. However irrespective of whether it is to be treated merely
as Minutes of Order or whether it is to be construed as consent terms
entered between Bank and Savannah, it must pass the muster of
being a lawful order or a lawful compromise.
57) I have held above that the arrangement agreed between
the Bank and Savannah is not only unlawful and it directly affects the
rights of Shaila Clubs and could not have been accepted by this Court
for disposing the Writ Petition No.11610 of 2022. What has happened
in the present case is that Writ Petition No. 11610 of 2022 filed
challenging the order of the learned Magistrate relating to execution
of possession warrant in pursuance of recovery certificate has been
disposed of by settling the loan account of Shaila Clubs with a third
party viz. Savannah. It was therefore otherwise questionable whether
the loan account of Shaila Clubs could have been settled in the light of
issue involved in the Writ Petition No.11610 of 2022. But in any case,
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such settlement of loan account can never be without the consent of
Shaila Clubs.
58) It sought to be contended by Dr. Tulzapurkar that as far
as the Bank and Savannah are concerned, the compromise is lawful
as the Bank itself walked up to Savannah with an offer to settle the
loan account of Shaila Clubs under OTS for an amount of
Rs.77,16,350/-. It is suggested that so far as the Bank is concerned,
the compromise is lawful as the Bank always intended to close Shaila
Clubs’ loan account upon acceptance of ascertained amount of
Rs.77,16,350/- under the OTS. It is contended that the Liquidator had
all the powers to ascertain the figure at which Shaila Clubs’ loan
account could be settled under the OTS and the Bank has taken
independent commercial decision of closing the loan account of Shaila
Clubs by accepting the amount of Rs.77,16,350/-, in addition to the
amount of Rs.2.50 crores already paid into the said loan account. Dr.
Tulzapurkar has contended that so far as validity of assignment of
loan account from Bank to Savannah is concerned, Shaila Clubs has
already raised objection to the validity of such transfer in the CIRP
initiated before NCLT and the said issue can be decided in those
proceedings. It is sought to be contended that NCLT is competent to
decide whether assignment of the loan of Shaila Clubs from the Bank
to Savannah is valid or not. Dr. Tulzapurkar has accordingly
contended that alleged invalidity of assignment of loan account cannot
be a reason for seeking recall/review of order dated 21 October 2022. I
am unable to agree with his contentions. The Minutes of Order dated
20 October 2022 has a seal of this Court in the form of order dated 21
October 2022. If the compromise is itself unlawful, the seal of this
Court put on such compromise must be removed so that no party is
permitted to rely on the same in any collateral proceedings by
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contending that that the compromise has been accepted by the High
Court and that the same is therefore valid. This is the first reason
why the specious plea sought to be adopted by Savannah about part of
the compromise dealing with rights of Bank being lawful must be
rejected. Secondly and more importantly, the compromise ultimately
affects the rights of Shaila Clubs, which has sought review of the
order dated 21 October 2022. Therefore, the review petition filed by
the Shaila Clubs cannot be dismissed by relegating it to remedy of
raising objection in CIRP before NCLT which does not have the
jurisdiction to declare that the compromise effected through the
Minutes of Order accepted by this Court is unlawful. NCLT would
always treat the Minutes of Order, with seal of this Court, to be
lawful. It is therefore necessary that the order dated 21 October 2022
is recalled.
59) Savannah has strongly objected to the locus standi of the
Liquidator to file Interim Application No.13400 of 2024. Reliance is
placed on provisions of Section 109 of the M.C.S. Act, under which the
maximum permissible period during which liquidation proceedings
can be continued is 15 years. Section 109 of the MCS Act provides
thus :-
109. Termination of liquidation proceedings
(1) The winding up proceedings of a society shall be closed as soon as
practicable within six years from the date the Liquidator takes over the custody
or control of all the property, effects and actionable claims to which the society
is or appears to be entitled and of all books, records and other documents
pertaining to the business of the society, under sub-section (2) of section 103),
unless the period is extended by the Registrar or the Government:
Provided that, the Registrar shall not grant any extension for a period
exceeding one year at a time and four years in the aggregate:
Provided further that, if it is necessary to grant further extension beyond
ten years, the Registrar shall send proposal for such extension to thePage No. 42 of 51
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exceeding one year at a time and five years in the aggregate:
Provided also that, immediately, after the expiry of fifteen years
from the date aforesaid, it shall be deemed that the liquidation
proceedings have been terminated and the Registrar shall pass an
order of terminating the liquidation proceedings:
Explanation.- In the case of a society which is under liquidation at the
commencement of the Maharashtra Co-operative Societies (Second
Amendment) Act, 1985 the period of six years shall be deemed to have
commenced from the date on which the Liquidator took over the custody or
control as aforesaid.
(2) Notwithstanding anything contained in the foregoing sub-section, the
Registrar shall terminate the liquidation proceedings on receipt of the final
report from the Liquidator. The final report of the Liquidator shall state
that the liquidation proceedings of the society have been closed, and how the
winding up has been conducted and the property of and the claims of the
society have been disposed of, and shall include a statement showing a
summary of the account of the winding up including the cost of liquidation,
the amount (if any), standing to the credit of the society in liquidation, after
paying of its liabilities including the share or interest of members, and
suggest how the surplus should be utilised.
(3) The Registrar, on receipt of the final report from the Liquidator, shall
direct the Liquidator to convene a general meeting of the members of the
society for recording his final report.
(emphasis added)
60) Under provisions of the MCS Rules, the unrealised assets
and the unrealised actionable claims at the conclusion of the
liquidation proceedings vests with Registrar, who is supposed to
appoint custodian or receiver to realise the same. Rule 89 provides
thus:
89. Appointment of Liquidator and the procedure to be followed
and powers to be exercised by him.
The following procedure shall be adopted for the appointment of the
Liquidator and for the exercise of his powers, namely:
(1) The appointment of the Liquidator shall be notified by the Registrar
in the Official Gazette.
(2) As soon as may be after the interim order is issued under Section
102,the Liquidator shall take over the custody and control of all thePage No. 43 of 51
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documents pertaining to the business of the society and continue to
hold custody and control thereof until the interim order is vacated.
(3) Where the interim order is vacated, the Liquidator shall take action
in accordance with the provisions of sub-section (6) of Section 103.
(4) Where the Liquidator receives the Registrars final order confirming
the interim order, the Liquidator shall publish by such means as he
may think proper a notice requiring all claims against the society to
be notified to him within two months of the publication of the notice
and shall thereafter proceed to take such further action as he is em-
powered to take under the Act. All liabilities recorded in the account
books of the society shall be deemed ipso facto to have been duly no-
tified to the Liquidator under this rule.
(5) The Liquidator shall, after settling the assets and liabilities of the
society as they stood on the date on which the order for winding up is
made, proceed to determine the contribution to be made or remain-
ing to be made to the assets of the society by persons and estates re-
ferred to in clause (h) of Section 105 and by order call upon each of
them to pay the amount specified in the order as contribution and as
costs of the liquidation determined under clause (k) of Section 105.
Every such order shall be submitted for approval to the Registrar,
who may modify it or refer it back to the Liquidator for further in-
quiry or other action or may forward it for execution under Section
98.
(6) If the sum assessed against any member is not recovered, the Liq-
uidator may issue subsidiary order or orders against any other mem-
ber or members to the extent of the liability of each for the debts of
the society until the whole amount due from members is recovered.
The provisions of sub-rule (5) shall mutatis mutandis apply to such
orders.
(7) The Liquidator shall submit a quarterly progress report and such
other returns and statements to the Registrar in such forms as the
Registrar may require showing the progress made in the liquidation
of the society.
(8) The Liquidator may empower any person, by general or special order
in writing, to make collections and to grant valid receipts on his be-
half.
(9) Unless otherwise permitted by the Registrar, all funds in charge of
the Liquidator shall be deposited in the Apex State Co-operative
Bank, or a Central Co-operative Bank or in the State Bank of India,
and shall stand in the name of the Liquidator.
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(11) The Liquidator shall have power to call meetings of members of the
society in liquidation.
(10) The Registrar shall fix the amount of remuneration, if any, to
be paid to the Liquidator. The remuneration shall be included in the
cost of liquidation which shall be payable out of the assets of the soci-
ety priority to other claims.
(11) The Liquidator shall have power to call meetings of members
of the society in liquidation.
(12) The Liquidator may submit an application to the Registrar for
the reconstruction of the society under Section 19 if he is of opinion
that such reconstruction has a reasonable chance of success.
(13) The Liquidator may, at any time, be removed by the Registrar
and he shall on such removal be bound to hand over all the property
and documents relating to the society in liquidation to such person or
persons as the Registrar may direct.
(14) (i)The Liquidator shall not exercise the powers under clauses
(c), (d), (e), (f, (g), (h) and (k) of Section 105 without the prior ap-
proval of the Registrar.
(ii) An appeal against the order of the Liquidator under
clauses (a), (b), (i), (j),(l), (m) and (n) of Section 105 shall lie to the
Registrar.
(15) The Liquidator shall keep such books and accounts as may
from time to time be required by the Registrar.
(16) At the conclusion of the liquidation proceedings, a general
meeting of the members of the society shall be called. At such meet-
ing, the Liquidator shall summarise his proceedings, point out
causes of the failure of the society, and report what sum, if any, re-
mains in his possession after meeting all the liabilities of the society
as determined under the rules and suggest how the surplus, if any,
should be utilised.
(17) At the conclusion of the liquidation proceedings, unre-
alized assets and unrealized actionable claims, if any shall
vest in the Registrar, who may appoint a custodian or re-
ceiver, to realize such remaining assets and actionable claims
as above and credit the same to the surplus. A custodian or
receiver may sue or defend any disputes arising out of such
proceedings thereunder:
Provided that, unrealized actionable claims shall be realized by the
Registrar or custodian as the case may be and expenditure incurred
for realization if any may be met out of the surplus kept at his
disposal.
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years is prescribed under Section 109 of the MCS Act. In the present
case, the Applicant-Bank has been under liquidation since 7 January
2009 and it is contended by Savannah that the liquidation proceedings
can continue only until 12 February 2024, whereas the present
application is filed on 21 August 2024 after the date of deemed
termination of the liquidation proceedings. It is therefore contended
that the Liquidator did not have authority to file the application after
termination of the liquidation proceedings. Liquidator has contested
this contention. It is contended that no formal order is passed as
mandated under Section 109 of the MCS Act by Registrar for
termination of liquidation proceedings and discharging the Liquidator.
It is also contended that the Liquidator has sent letter to the
Registrar seeking extension of time of three years for completion of
the liquidation proceedings and that the Registrar has directed to
submit final audit report vide letter dated 21 March 2024. It is
contended by the liquidator that an audit report as on 26 February
1984 has been submitted alongwith letter dated 18 November 2022
and that the General Body of the Bank has resolved to continue the
liquidation proceedings. That formal minutes of the AGM of the Bank
are yet to be drawn up. The Liquidator therefore contends that she
continues to remain in charge of the Applicant-Bank.
62) Rival parties have relied upon judgments in support of
their respective contentions. Mr. Seervai has relied upon judgment of
the Apex Court in Goa State Co-Operative Bank Limited (supra)
in which the issue was whether the proceedings for recovery of dues
instituted and pending against members would stand closed upon
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expiry of period fixed for liquidation under Section 109 of the MCS
Act. The Apex Court held in paragraphs No.18, 21 and 25 as under:
18. It is apparent from the facts of the instant case that the winding up of
the Society has been ordered and the Liquidator has been appointed as the
Society has utterly failed to achieve its avowed objectives in disbursement of
loans to proper persons and in its recovery. No doubt about it that the
liquidation of the Society has come to an end after a particular period of
time as fixed under Section 109. However, on lapse of time as fixed under
sub-section (1) of Section 109 of the Act, proceedings have to be terminated
by the Registrar on receipt of final report from the Liquidator as ordered
under Section 109(2). However, at the same time, the Registrar has power
to extend the period of 6 years fixed under Section 109(1), not exceeding one
year at a time and four years in the aggregate, and maximum for 10 years.
In case time is not extended, the winding up comes to an end on the expiry
of 6 years or at the end of the extended period. The total period can be 10
years. The second proviso to Section 109 makes it clear that if the Registrar
comes to a conclusion that the work of liquidation could not be completed by
the Liquidator due to the reasons beyond his control, he shall call upon the
Liquidator to submit his report. After getting the report, if the Registrar is
satisfied that the realisation of assets, properties, sale of properties still
remains to be realised, he shall direct the Liquidator to complete the entire
work and carry out the activities only for the purposes of winding up and
submit his report within such period not exceeding one year reckoned from
the date of receipt of the report from the Liquidator.
21. It is apparent that on the termination of the liquidation proceedings,
liability of the members for the debts taken by them does not come to an
end. There is no such provision in the Act providing once winding-up period
is over, the liability of the members for loans obtained by them which is in
their hands, and for which recovery proceedings are pending shall come to
an end. No automatic termination of recovery proceedings against the
members is contemplated. On the other hand, on completion of the period
fixed to liquidate the Society, final report has to be submitted as to the
amount standing to the credit of the Society in liquidation after paying off
its liabilities including the share or interest of members. Thus, even in the
case of liquidation the accountability remains towards surplus and
liabilities do not come to an end. Even if the period fixed for liquidation of
Society is over, that does not terminate the proceedings for recovery which
have been initiated and appeals are pending.
25. Once a report has been submitted, the Registrar has to take action in
terms of the report and in such circumstances when the proceedings for
recovery are pending against the members and the Society has taken loan
from the banks for its member, the actual money has to go to the creditor
i.e. to the bank who is going to be benefitted by recovery of public money in
the hands of members. In such cases it would be appropriate for the
Registrar to send notice of the proceedings to a person who is to be
benefitted from the recovery. In the instant case, the Bank itself is a prime
lender-cum-liquidator. The proceedings cannot come to the end. Thus, in
our considered opinion, it is open to the bank to continue with the recovery
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proceedings and make recoveries from the defaulting members. Merely on
the liquidation of the Society, or the factum that the period fixed for
liquidation is over, liability of the members for the loans cannot be said to
have been wiped off. The disbursement of loan in an arbitrary manner and
failure to recover was the very fulcrum on the basis of which winding up of
the Society was ordered.
63) On the other hand, Dr. Tulzapurkar has relied upon
judgment of Division Bench of this Court in Ashok Kisanrao Hande
(supra) in which it is held in paragraph No. 7 and 17 to 19 as under :-
7. It is mentioned in the Petition that the extension was granted for
liquidation proceeding on 10/12/2009 for a period of one year. The
Petitioner has made reference to the proceedings in the Small Causes
Court, in respect of premises of which M/s. Sunrise was landlord. The
premises of the said bank was in the possession of the liquidator. It is
prayed in this Petition that the letters dated 07/04/2012 and 19/04/2012
denying further extension be set aside. The letter dated 19/04/2012 is the
letter issued by the Government of Maharashtra to the Commissioner for
Cooperation and Registrar Cooperative Societies for approaching the
Assistant Government Pleader, High Court to file appropriate affidavit in
WP No.315/12 pointing out the rejection of extension for liquidation. In the
present proceedings we are only considering the question of extension of
liquidation proceedings and we are not deciding any question related to the
premises which are in possession of the liquidator.
17. As can be seen, the said section provides that, including extensions,
the winding up proceedings cannot be extended beyond the period of 10
years, from the date on which, the liquidator took over custody of the said
bank. The period provided under the said section is mandatory and cannot
be extended in any circumstances. This view is expressed by a Division
Bench of this Court at Nagpur in the judgment dated 15/12/2009 in WP
No.1625/06 in the case of Dr.Raju @ Ramchandra Narendra Deoghare Vs.
Government of India and others.
Paragraph No.46 of the said judgment reads thus;
“In our considered opinion, the ratio laid down in the above referred
judgment of the Madhya Pradesh High Court, which was delivered
after considering the Apex Court judgment is squarely applicable in
the present case. The language of Section 157 of the Act is clear and
unambiguous. Section 157 of the Act does not give power to the State
Government to validate continuation of Liquidator after his period is
over in terms of Section 109 of the Act…….”
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18. The Division Bench has given detailed reasons for making such
observations and we respectfully agree with these observations. In our view
therefore, the extension cannot be given beyond the period prescribed u/s
109 of the said Act and section 157 of the said Act cannot be brought in aid
to seek such extension beyond the prescribed period.
19. After filing of this Petition in the year 2014 subrule 17 was introduced
in Rule 89 of the Maharashtra Cooperative Societies Rules, 1961. SubRule
17 of the Rule 89 reads thus;
(17) At the conclusion of the liquidation proceedings, unrealized
assets and unrealized actionable claims, if any shall vest in the
Registrar, who may appoint a custodian or receiver, to realize such
remaining assets and actionable claims as above and credit the same
to the surplus. A custodian or receiver may sue or defend any
disputes arising out of such proceedings thereunder:
Provided that, unrealized actionable claims shall be realized by the
Registrar or custodian as the case may be and expenditure incurred
for realization if any may be met out of the surplus kept at his
disposal.
64) In my view, considering the peculiar facts and
circumstances of the case, it is not really necessary to delve deeper
into the aspect of Liquidator’s authority to file and maintain Interim
Application No.13400 to 2024. Even if it is technically held that the
Liquidator did not have authority to file Interim Application No.
13400 of 2024 as on 21 August 2024, Savannah would still have to
face Review Petition No.85 of 2024 filed by Shaila Clubs. The real
issue involved in the present case is whether the compromise is lawful
and whether the order dated 21 October 2022 deserves to be recalled
and /or reviewed. After having arrived at the conclusion that
compromise is unlawful and the order passed by this Court on 21
October 2022 deserves to be recalled, I am not inclined to entertain
the technical plea sought to be raised by Savannah about Liquidator’s
locus to file Interim Application for recall, especially in the light of the
fact that the order is otherwise reviewable on application filed by
Shaila Clubs and its suspended director.
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65) On the issue of delay in filing of Interim Application
No.13400 of 2024 and in filing the two Review Petitions, it is well
settled position of law that mere delay, not involving latches,
acquiescence or estoppel, would not prevent this Court from exercising
inherent power of recalling its order. The inherent power of this Court
in recalling an order is not circumscribed by considerations of delay.
Once this Court arrives at a conclusion the compromise is unlawful
and could not have been acted upon by this Court, mere delay would
not be a hurdle for this Court to recall and/review the recording of
unlawful compromise. Reliance by Mr. Seervai on judgments in
Annada Prasad Mitra, Somar Bhuiya, Pooranchand Mulchand
Jain, M.M. Thomas and State of Maharashtra V/s. Digambar
(supra) in this regard is apposite. Once this Court arrives at a
conclusion that the compromise itself is unlawful, mere delay in filing
applications for recall or review cannot be a reason for shutting the
doors of this Court on technical ground of delay. I am therefore not
discussing the ratio of various judgments relied upon by Mr. Seervai
on the proposition of mere delay not coming in the way of the Court
setting aside an obvious error. I am inclined to allow Interim
Application No.10662 of 2024 filed for condonation of delay in Review
Petition No.85 of 2024. It appears that Shaila Clubs had actually filed
the Review Petition No.38 of 2023 in January 2023 itself and fresh
Review Petition was required to be filed by its suspended Director on
account of initiation of CIRP against Shaila Clubs. This is yet another
reason why delay in filing Review Petition No.85 of 2024 deserves to
be condoned.
66) After considering the overall conspectus of the case, I am
of the view that the order passed by this Court on 21 October 2022 on
the basis of Minutes of Order dated 20 October 2022 deserves to be
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recalled both in application filed by the Bank as well as in the Review
Petitions filed by Shaila Clubs and its suspended director.
67) I accordingly proceed to pass the following order:
i. Interim Application No.10662 of 2024 filed for seeking
condonation of delay in filing Review Petition No. 85 of 2024
is allowed.
ii. Order dated 21 October 2022 passed in Writ Petition No.
11610 of 2022 in view of Minutes of Order dated 20 October
2022 is recalled.
iii. Writ Petition No.11610 of 2022 is restored. List the petition
for admission on 2 April 2024.
68) With the above directions, Interim Application No.13400
of 2022 as well as Review Petition Nos.85 of 2024 and 38 of 2023 are
allowed. Nothing would survive in rest of the Interim Applications,
which are disposed of.
[SANDEEP V. MARNE, J.]
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