Judgment
As delivered
REPORTABLEIN THE SUPREME COURT OF INDIACIVIL APPELLATE JURISDICTIONI. A. No. 1 IN CIVIL APPEAL No. 3303 OF 2005
Indian Bank ... Appellant(s)
Versus
Godhara Nagrik Coop. CreditSociety Ltd. & Anr. etc. etc. ... Respondent(s)
WITH
I. A. No. 1 IN CIVIL APPEAL No. 3336 OF 2005,I. A. No. 1 IN CIVIL APPEAL No. 3337 OF 2005 ANDI. A. No. 1 IN CIVIL APPEAL No. 3338 OF 2005
ORDER
1] Indian Bank has filed these applications praying for
clarification of certain directions contained in the final
judgment dated 16.05.2008 of this Court in Civil Appeal No.
3303/2005 along with Civil Appeal Nos. 3336, 3337, 3338
and 3304-3335 of 2005.
2
2.1] Respondents herein are cooperative societies registered
under the Cooperative Societies Act. They deposited certain
amounts in cash in fixed deposits of Banks wherefor Fixed
Deposit Receipts (FDRs) were to be issued. Such deposits were
made through some so-called Commission Agents of the
Banks on payment of huge commission which is ordinarily not
allowed by the Nationalized Banks.
2.2] Applications for grant of loans by various persons were
filed before the prescribed authorities of the banks on the
basis of the said FDRs. Allegedly a large number of officers of
the banks were involved in a scam whereby unofficial
investments of the said amount were being made.
2.3] As and when the FDRs matured, the investors requested
the Banks for their encashment. The banks refused to accede
thereto stating that the amount under the FDRs had already
been paid by way of loans and, thus, no further amount was
payable. It was contended that a fraud on the banks has been3
practiced to which the depositors and the officers of the banks
were parties.
2.4] Writ petitions were filed. A learned Single Judge of the
High Court opined that serious disputed questions of fact
being involved in the said writ petitions, no relief can be
granted to the writ petitioners.
2.5] Despite the same, the learned single judge relying on the
provisions contained in Section 35A of the Banking
Regulations Act, 1949 directed constitution of a Committee
under the Chairmanship of the Deputy Governor of Reserve
Bank of India or his nominee to go into the matter in great
details. Various powers were delegated in favour of the
Committee including the one that the decision of the
Committee shall be final and binding upon the parties.
2.5.1] A Division Bench of the said Court in an intra court
appeal preferred thereagainst, however, stayed only the4
operation of some of the clauses of the said order. The
Committee, however, was allowed to function.
2.5.2] A special leave petition filed thereagainst has been
dismissed by this Court with certain observations.
2.6] The Committee submitted its report. It was found that
principally the officers of the banks were involved in the
matter of commission of the alleged fraud on the Banks.
2.6.1] Members of the Committee, however, differed in their
opinion as to whether, having regard to the limited scope of
the enquiry, any positive direction could be issued.
2.7] Relying on the report of the Committee, the Division
Bench of the High Court opined that as the writ petitioners
were not parties to the fraud, subject to any other or further
orders that may be passed in the criminal case, appellant-
banks should be directed to pay the amounts under the FDRs
to the depositors.
5
2.8.1] Appellants filed appeals aggrieved by the said order,
upon obtaining special leave thereof.
2.8.2] On 5th April 2004, a limited notice was issued by this
Court, which is to the following effect:-
"Issue notice on the special leave petition limitedto the question as to whether the High Courtshould have directed payment having regard tothe fact that the Committee itself had not finallyresolved the question of liability as far as thedisputed amount was concerned.
Issue notice on the prayer for interim relief also."
2.8.3] This Court in its order dated 10th December, 2004
explained the said order stating:
"The issue which is now required to be resolvedis a narrow one viz. whether the Committee hadfinally decided that the amounts payable by theBank (a) were the liability of the Bank and (b) ifso, what was the quantum if any, payable by theBank to the depositors. Learned Counselappearing on behalf of the respondent prays fortime till after the vacation.
6Let the matter appear two weeks after reopeningon a miscellaneous day.
There will be interim order staying the operationof the impugned order."
2.8.4] However, by an order dated 9th May, 2005, upon
hearing the counsel for the parties, `Leave' was granted, as a
result whereof all the contentions of the parties are now open.
3] Having heard the learned counsel for the parties at
length and having noticed and considered the propositions of
law touching the issues involved in these appeals, this Court
allowed the appeals with the following directions [see 2008 (7)
SCALE 363 paras 18,19,20,21,22,& 23 at pgs. 376-377]:-
"18. But it is, in our opinion, not a publicinterest litigation in that sense of the term. Thereport, however, was not unanimous. Theopinion of the Committee was a divided one onthe crucial issue. Two members of the Committeewere of the opinion that whether the amountdeposited by the cooperative banks was receivedback by them or not, was yet to be ascertained.We are, therefore, of the opinion that it cannot besaid that the fact finding body, assuming that the7
same could be constituted, made suchrecommendations which could be accepted bythe Court without going into the merit thereof. Itis also not a case where any mandatory reliefcould be granted in favour of the respondents.
19. Having however said so, we must pose untoourselves a further question. Could thosecooperative societies which had absolutely norole to play in the entire episode should suffer inany manner whatsoever? The cooperativesocieties/cooperative banks for the purpose oftheir day-to-day functioning require the amountwhich they have invested in FDRs on theirmaturity. Should they wait till the criminal casesare over? Should they be pushed to institute civilsuits? They can indisputably be compensated bygrant of interest. What, however, happens if inthe meanwhile in the absence of the requisitefunds being available to them, they find itdifficult to run the day-to-day affairs?
20. Answers thereto may be difficult to find butit is not a wholly impossible task. We think thatthe appellant Bank being a `State' within themeaning of Article 12 of the Constitution of Indiawith the assistance of officer(s) of the CentralBureau of Investigation should make all attemptsto ascertain as to which of the cooperativesocieties/cooperative banks are in no wayinvolved with the scam, and subject to suchprecautions as may be found necessary to betaken, release the amount in their favour.
21. In any event, the quantum of the amountwhich all the depositors would have otherwisereceived, in the event their investment in FDRs is8
found to be genuine, should be informedthereabout. Once the liability of the bank isdetermined, the bank may invest the saidamount in its own account and issue fresh FDRstherefor. Whereas the bank may keep the originalFDRs with itself, it may issue the duplicatecopies thereof to the eligible cooperative bank.Such an exercise should be completed within aperiod of four weeks from date.
22. In the event, the cooperative societyintending to avail loan facilities from the banksfor running their business, may approach themwhich may apart from usual conditions releasethe same on a further condition that the amountof FDR would remain with them and on thatbasis, loans may be granted of such amount. Theusual precautions in regard thereto may also betaken by the Bank(s).
23. We, while saying so, do not intend to laydown any law. These directions should not betreated to be precedent. We are issuing thesedirections keeping in view that the factualscenario obtaining in the case and that non-release of the amount is likely to enure hardshipsthat may be faced by the cooperative societies.We would also direct the criminal court todispose of the criminal cases pending beforethem with utmost expedition. These appeals areallowed with the aforementioned directions.There shall, however, be no order as to costs."
4] Applicant-Indian Bank by means of these applications
submits that this Court has proceeded on the basis that in the9
Indian Bank matters also there was CBI investigation, but in
fact there is no CBI investigation nor there are CBI cases
registered or pending in respect of the Indian Bank matters.
The applicant-Bank has averred that in the absence of any
case pending against the cooperative societies in the Indian
Bank matters except one where FDRs were lost and police
case was instituted in which the office bearers of the said
society was found to be involved by the police and after filing
of the charge sheet, criminal case is pending in the concerned
court, there is no protection of recovery of loan amount by the
Indian Bank from the societies, who are not involved in the
CBI cases. Further, it is stated that the facts of the cases of
Indian Bank and the Bank of Baroda were not similar and
identical. It appears that in the Bank of Baroda matters some
criminal cases/CBI cases are pending in which some officers
of the Bank of Baroda are involved in the scam without the
fault of the cooperative societies who should not suffer and
should be paid the FDR amount along with interest.10
5] The applicant-bank next submits that there is no
direction in the judgment of this Court dated 16.05.2008 that
the tainted societies will have to file civil suit and the FDRs
invested as per the directions of this Court will be subject to
the outcome of the suit. It is also submitted that pursuant to
the judgment passed by this Court the societies involved in
the Indian Bank matters have raised demand notices calling
up the banks to make payment mentioned in the demand
notices and if the demand of the societies is accepted then
that would amount to double payment without there being
any protection to the bank. The applicant-bank also submits
that as per its understanding from the text of the judgment,
the bank should proceed on the basis that if the tainted
societies are innocent and thus to inform them in regard to
the matured amount as on date and then to invest the said
amount in the bank in the form of FDRs. The fate of the
invested FDR will be subject to the outcome of the criminal
cases as well as civil cases which may be instituted by the
societies. The applicant-Bank is aggrieved against the above
extracted directions contained in the judgment to the extent11
that there is no categorical direction that invested FDR
amount will be subject to civil or criminal cases.
6] On the above-noted premise, the present applications
have been filed seeking clarification of the directions relating
to the cases of the applicant-Indian Bank.
7] We have heard learned counsel for the parties.
8] In Para 20 of the judgment, the direction that, Banks
and CBI shall sit together and identify cooperative societies
which are in no way involved in scam, has been issued on the
assumption that CBI has investigated matters pertaining to all
cooperative societies and thus innocent societies can be
identified and the amount may be paid to them. The
submissions of the applicant-Indian Bank pleaded in these
applications that there was no CBI investigation/case
pertaining to the matters of Indian Bank have not been
brought to the notice of this Court at the time of hearing and
disposal of the appeals filed by the Indian Bank. Had the 12
correct statement of facts been pleaded and contended by the
applicant-Indian Bank at the time of hearing of its appeals,
undisputedly there was no occasion for this Court to labour
hard for issuing such a direction pertaining to the cases of the
cooperative societies-depositors which are not in any way
involved in the scam. Thus, applicant-Indian Bank has
misrepresented the facts before this Court at the time of
hearing of its appeals and now, after realizing its glaring
mistakes, these applications have been filed for seeking
clarification of the directions contained in Paras 20, 21 and 22
of the original judgment.
9] Now, in the background and on reconsideration of the
factual situation, the direction contained in Para 20 of the
judgment to the extent that `the bank with the assistance of
Officer of the Central Bureau of Investigation should make all
attempts to ascertain as to which of the cooperative societies
and cooperative banks are in no way involved in the scam',
shall not apply to the cases of the Indian Bank. The Indian
Bank, however, in the interest of cooperative societies whose 13
FDRs are lying in deposits and availed the loan facilities, shall
on its own identify and ascertain the societies who are not
involved in any CBI investigation/case and on such
ascertainment and verification, the cooperative societies-
depositors shall be informed regarding the maturity of their
FDRs. If the maturity amounts of the FDRs are adjusted
against the loan amount advanced to the cooperative societies
and if there exists any dispute between the depositors
societies and the Indian Bank about the recovery or payment
of the money, the aggrieved party can get its claim adjudicated
through appropriate proceedings before the appropriate forum
or court as permissible under law. If there is no dispute in
regard to the payment of amount of matured FDRs, the Indian
Bank shall not debar or preclude the innocent cooperative
societies-depositors from taking loan against FDRs being
10] We make it clear that the judgment dated 16.05.2008
shall stand clarified to the extent indicated above so far, it
pertains to the cases of Indian Bank. This clarification will 14
however, not dilute or affect other directions issued in the
11] In the facts and circumstances of the case for the above-
stated reasons, the applications filed by applicant-Indian
Bank are allowed. However, in view of the conduct of the
applicant-Indian Bank, it is directed to pay cost of
Rs.20,000/- within four weeks from this order, which shall be
deposited in the account of the Supreme Court Legal Services
......................................J. (S. B. Sinha)
......................................J. (Lokeshwar Singh Panta)
New Delhi, March 24, 2009.
