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TMI Blog2015 (7) TMI 1390X X X X Extracts X X X X X X X X Extracts X X X X ..... es necessary provisions for the expenses in relation to the liquidation proceedings and for declaration of the dividend and thereafter makes payment to the DICGC as observed herein above and only thereafter, if any excess amount is there with the official liquidator of the concerned Bank in liquidation, the same can be directed to be paid to the concerned decree holder/in whose favour the award is passed. However, that too subject to the priority as provided under the provisions of the Gujarat Cooperative Societies Act. The sum and substance of the above shall be that the DICGC shall be entitled to the first preference over the payment/amount available with the concerned official liquidator of the concerned bank in liquidation. However, after making necessary provisions by the official liquidator, for the expenses in relation to the liquidation proceedings and for declaration of dividend. The impugned common judgment and order passed by the learned Single Judge passed in Special Civil Application No.4260 of 2009, Special Civil Application No.7617 of 2009 and Special Civil Application No.6978 of 2009 are hereby quashed and set aside - the Letters Patent Appeals are allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Patent Appeal No.1300 of 2010. 2.1 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Single Judge in SCA NO.4260 OF 2009, the original Petitioner-Deposit Insurance and Credit Guarantee Corporation (herein after referred to as DICGC) has preferred the LPA No.906 of 2010. Similarly, feeling aggrieved and dissatisfied with the judgment and order passed by the learned Single Judge in SCA No.4260 of 2009, the liquidator of Ahmedabad District Cooperative Bank Ltd., and the liquidator of Gujarat State Cooperative Bank Ltd., and the liquidators of the Anand Peoples Cooperative Bank Ltd., (in liquidation) and the liquidator of the Petlad Commercial Cooperative Bank Ltd., (in liquidation) have preferred the respective LPA No.1306 of 2010; LPA No.1307 of 2010; LPA No. 238 of 2013 and LPA No.239 of 2013. 2.2 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Single Judge in SCA No.6978 of 2009, the respective liquidators of Ahmedabad District Cooperative Bank Ltd., (in liquidation), the liquidator of General Cooperative Bank Ltd., (in liquidation), the liquidator of Gujarat State Cooperative Bank Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned in the main SCA) and in the said decision the liquidator had put up the claim of the original petitioner Corporation DICGC in the category of creditor after secured creditor and the government dues as well as the claim of the workers which gave rise to the aforesaid SCAs by the DICGC. That by impugned common judgment and order, the learned Single Judge has though as such quashed and set aside the decision of the liquidator of fixation of the priority, the learned Single Judge has directed the concerned liquidators to decide the question of priority in light of the observations made in the common impugned judgment and order. 3.3 It is required to be noted that as such by impugned judgment and order, the learned Single Judge has negatived the claim on behalf of the original petitioner DICGC that they are required to be repaid first, the amount which is paid by them to the concerned respective depositors, paid under the Regulations 1961, after making provisions for expenses and before making any other payment to the depositors and creditors of the concerned Banks (in liquidation). Therefore, DICGC original petitioners have preferred the aforesaid LPAs. 3.4 As observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debts of such creditors. It is only thereafter the priority is to be fixed by the Liquidator. Even at the time of fixing the priority the laws relating to the insolvency proceedings and winding up proceedings are required to be taken into consideration by the Liquidator but it is only when there are valid reasons for making departure therefrom or there is any express statutory provisions may be by way of State Act or Central Act, the departure therefrom may be permissible. Otherwise in normal circumstances, it would be expected for the Liquidator to go by the priority as may be available to different classes of creditors for their different debts in the insolvency proceedings or winding up proceedings. Therefore, it is not possible to hold that the Liquidator of each Society or each Bank has power to decide the priority of various classes of creditors separately or classify various debts separately for satisfying the claims against the Society. If such power is read, it will not only create an anomalous and ambiguous situation, but it will leave room for arbitrary exercise of power in liquidation proceedings of each Society by the Liquidator. Therefore, it will have to be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The crown debt as unsecured creditors will have priority over other unsecured creditors. It may also be recorded that the claim of any of the secured creditors will be to the extent of security so available and to the extent of security interest created therein and once the security is exhausted or the interest is satisfied, the remaining part of the debt would be classifiable as unsecured debt. The Liquidator, therefore, while exercising the power of fixation of priority will be required to take into consideration the aforesaid various classes of creditors and the assets of the society or the bank will be required to be distributed accordingly either in full or rateable as per the category of such debt and to the extent available therefrom. *** 11.The aforesaid would show that in the insolvency proceedings or in the proceedings of winding up of a company, the normal priority has to be as under:( 1) Secured debts of the crown or the State may be by way of a security created as per Transfer of Properties Act or may be by way of express charge created by any statutory provisions to such Government dues, subject to the conditions of the quantum of such debt or to the extent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de immediately after making provisions for expenses to the respondent Corporation. By impugned judgment and order, the learned Single Judge has also negatived/rejected the claim of DICGC that the claim of the Corporation should be treated as in priority i.e. next to the secured creditors and above unsecured creditors. 5. Shri S N Soparkar, learned Senior Advocate appearing on behalf of DICGC has submitted that now the controversy in the present group of appeals i.e. with respect to claim of DICGC above the depositors, creditors and workman and the contention on behalf of DICGC that they are required to be repaid first, the amount which is paid by them to the depositors, paid under Regulations 1961, prior to any amount paid to the concerned depositors, creditors and / or workman, however after deducting the expenses made by the liquidator is now not res integra in view of the decision of the Hon'ble Supreme Court in the case of Deposit Insurance Credit Guarantee Corporation Vs. Raghupathi Ragavan Ors., decided on 01/07/2015 in Civil Appeal No.1035 of 2008 and other allied Civil Appeals. It is submitted that on interpretation of the Regulations 1961, more particularly, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he depositors, creditors (secured and unsecured creditors), workmen and government dues, with respect to the amount paid by them to the concerned depositors paid under Regulations 1961, however except the amount of expenses incurred by the liquidator. 7.1 By impugned judgment and order, the learned Single Judge has negatived the same and has rejected the priority claimed by the DICGC, claimed over the depositors, creditors (secured and unsecured) and even workmen, however in view of the recent decision of the Hon'ble Supreme Court in the case of Raghupathi Ragavan Ors., (supra), the aforesaid main issue involved in the present appeals is now not res integra. While considering the relevant provisions of Regulations, 1961, in paragraph Nos.18 to 31, the Hon'ble Supreme Court has observed and has held as under: 18. Upon hearing the learned counsel appearing for the parties and looking at the facts of the case, we are of the view that this appeal deserves to be allowed. We note the fact that Writ Petition Nos.6768 of 2005 and 7372 of 2005 had been finally disposed of at an admission stage. In the said petitions, the present appellant Corporation was not made a party, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the disposal of the Official Liquidator, which he might have recovered from the borrowers or from other sources, he has to pay the said amount to the extent to which the amount had been paid by the Corporation as per the provisions of Section 21 of the Act. Section 21 of the Act reads as under : 21. (1) Where any amount has been paid under section 17 or section 18 or any provision therefor has been made under section 20, the Corporation shall furnish to the liquidator or to the insured bank or to the transferee bank, as the case may be, information as regards the amount so paid or provided for. 2) On receipt of the information under subsection (1), notwithstanding anything to the contrary contained in any other law for the time being in force, (a) the liquidator shall, within such time and in such manner as may be prescribed, repay to the Corporation out of the amount, if any payable by him in respect of any deposit such sum or sums as make up the amount paid or provided for by the Corporation in respect of that deposit; (b) the insured bank or, as the case may be, the transferee bank, shall, within such time and in such manner as may be prescribed, repay to the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to each depositor. (b) the insured bank or the transferee bank, as the case may be, as soon as the realisations and other amounts in its hands, after making provision for expenses payable by that time in respect of such realisations or other amounts in its hands are sufficient to enable it after the date of coming into force of the scheme referred to in section 18 of the Act, to pay or credit in respect of each depositor a sum not less than one paisa in the Rupee. 28. The aforestated Regulation 22 also provides that the Official Liquidator, after making necessary provision for the expenses in relation to the liquidation proceedings and for declaration of dividend, as prescribed in the Regulations, has to make payment to the Corporation. 29. In view of the aforestated statutory legal provision, in our opinion, the High Court should not have given the direction which, if complied with, would run contrary to the statutory provisions incorporated in the Act. 30. Even if one looks at the entire issue from different point of view, one would believe that all the depositors have by and large equal right. If the amount deposited is less than ₹ 1 lakh, each depositor gets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only thereafter any amount in excess can be paid to the other creditors as per the priority provided under the provisions of the Gujarat Cooperative Societies Act. 9.1 Even, the concerned depositor/s in the present case, petitioner of Special Civil Application No.7617 of 2009 (Letters Patent Appeal No.2458 of 2009), Shri Ambaji Mata Devasthan Trust, in whose favour there is a decree passed by the competent Court is/are concerned, they can be said to be the unsecured creditors only and, even if they are permitted to proceed further with the execution proceedings to execute their respective decree/awards in their favour, in that case also, the concerned liquidator (who can be said to be a debtor and against whom the decree/award is passed) can be permitted to make the payment and satisfaction of the decree/award only after the official liquidator makes necessary provisions for the expenses in relation to the liquidation proceedings and for declaration of the dividend and thereafter makes payment to the DICGC as observed herein above and only thereafter, if any excess amount is there with the official liquidator of the concerned Bank in liquidation, the same can be directed to be ..... 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