2008 (9) TMI 571 - HC - Companies Law

Repayment of amount to corporation - Held that - The apprehension expressed by the petitioner-society that on account of repayment to the first respondent, the depositors of the second respondent-bank would be denied the admitted amounts due to them appears to be without any basis in the light of the resources available to the second respondent-bank as explained in its counter-affidavit. Hence, the repayment being made by the second respondent-bank to the first respondent-Corporation in accordance with section 21(2)(a) of the Act, read with regulation 22 cannot be found fault with and no mandamus as prayed for can be issued compelling the second respondent to act in contravention of the statute.

Summary

Issues:
Claim for mandamus directing payment to depositors under Deposit Insurance and Credit Guarantee Corporation Act, 1961.

Analysis:
The petitioner, a registered society representing shareholders and depositors of a bank, sought a mandamus to direct a corporation to pay Rs. 227.13 crores to the depositors as per the Deposit Insurance and Credit Guarantee Corporation Act, 1961. The bank in question was wound up, and a Liquidator appointed. The petitioner alleged that the corporation demanded repayment from the bank before settling all depositors' claims. The corporation admitted liability of Rs. 227.13 crores but had only paid Rs. 75.59 crores. The corporation sought repayment from the bank, leading to the writ petition to restrain such repayments.

The court analyzed relevant provisions of the Act and Regulations, emphasizing the corporation's liability to pay depositors upon a bank's winding up. The Liquidator is mandated to repay the corporation from available amounts. The court noted that the Liquidator must ensure sufficient funds to declare dividends to depositors but found no prohibition on repayments to the corporation. The bank had recovered substantial amounts post-winding up and had funds available to repay depositors even after repaying the corporation.

The court highlighted that the corporation's claim for repayment was statutory and legitimate, with a right of preference over other creditors. The petitioner's apprehensions of depositors being denied their dues due to repayments to the corporation were unfounded, given the bank's available resources. The court concluded that the repayments made by the bank to the corporation were in accordance with the Act and Regulations, dismissing the writ petition for lacking merit.

In summary, the judgment clarified the legal obligations under the Deposit Insurance and Credit Guarantee Corporation Act, 1961, regarding repayments to depositors and the corporation. It emphasized the statutory nature of the corporation's claim and the absence of any prohibition on repayments to the corporation by the bank. The court found the corporation's actions lawful and dismissed the petition, affirming the bank's compliance with statutory provisions.