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Judgment
Ashok Menon, Chairperson
The Appellant is the Bank of Baroda. Original Application No. 555 of 2001 (OA) was filed by Dena Bank for recovery of ₹ 2,120,934/-together with the interest from the defendants. Dena Bank later merged with the Bank of Baroda and was substituted as the Appellant. The appeal impugns the judgment dated 24/02/2006 delivered by the Debts Recovery Tribunal-3 Mumbai (‘DRT’ for short) in the aforesaid OA.
The 1st defendant is a Cooperative Society registered under the Maharashtra State Cooperative Societies Act, 1960 (‘Societies Act’ for brevity). The Society was formed with the object of providing a lift irrigation facility for irrigating about 200 acres of agricultural land belonging to its 87 members. The 1st defendant approached the Applicant bank in April 1990 for a term loan of ₹ 10 lakhs in order to finance the lift irrigation scheme. The 2nd defendant is also a Cooperative Society known as the NashikSahakariSakharKharkhana Ltd. The lift irrigation scheme referred to above was prepared by the 2nd defendant and they had also agreed to stand a guarantee for the loan applied by the 1st defendant. To secure the above-mentioned credit facilities, the 1st defendant agreed to assign all its rights title in the lands belonging to its members. They also agreed to hypothecate the movable assets connected with the irrigation of the land. Two demand promissory notes were executed by the 1st defendant for sums of ₹ 50,000/-on 22/05/2090 and yet another promissory note for ₹ 10 lakhs was executed on 28/05/1990 by the chairman, vice-chairman and secretary of the society for and on behalf of the society. Interest at the rate of 15% per annum with quarterly rests and in case of default, a penal interest of 2% per annum over the aforesaid credit facilities was also agreed to be paid. The term of the loan was for 11 years and the payment of yearly instalments commenced on 30/06/1992. The 2nd defendant represented through its managing director and director at the relevant time agreed to assist the Applicant bank in the recovery of the dues payable by the 1st defendant. A guarantee deed to that effect was also executed by the 2nd defendant. A deed of assignment was also executed by the 1st defendant in favour of the bank. On request made by the defendants, an additional loan of ₹2.12 lakhs was also sanctioned by the bank to meet the cost of the revised project. A tripartite agreement was executed between the bank and the defendants. The 1st defendant defaulted on payment and the Applicant bank was constrained to issue legal notice on 08/09/2000 calling upon them to pay the amount. Statutory notice required under section 164 of the Societies Act was also issued to the Registrar of Cooperative Societies on 09/09/2000. The Applicant bank is entitled to claim interest at the contractual rate. The OA was filed seeking to issue a recovery certificate to appropriate the amounts due from out of the immovable properties of the first defendant and its members, more particularly described in Exts. D and F, and also the movables described in Ext. I. An injunction was also sought to restrain the defendants and its members from alienating the assets mentioned in Exts. D, F and I.
The 2nd defendant remained ex parte while the 1st defendant appeared but did not file any written statement contesting the claim of the bank.
After considering the documents produced and hearing the counsel appearing for the Appellant bank, the claim was allowed together with simple interest at the rate of 10% per annum on the principal amount of ₹ 10 lakhs from the date of filing of the application till realisation from defendant numbers 1 and 2. The Ld. Presiding Officer refused to order a charge over the lands of the members of the society stating that the Applicant did not produce any deed of assignment executed by the members of the society, and therefore, no charge over the property of the members of the 1st defendant society was decreed.
Aggrieved by the above-mentioned impugned judgment of the DRT, the Appellant is in appeal. The main grounds of appeal are that the DRT failed to grant a decree creating a charge over the immovable properties belonging to the 1st defendant and its members. It is stated that the Ld. Presiding Officer erred in appreciating the purport of section 48 of the Societies Act. Hence it is prayed that the decree dated 20/04/2006 passed by the Ld. Presiding Officer may be modified granting a charge over the immovable property belonging to the 1st defendant society and its members.
The Respondents did not appear in remained ex-parte. MsSabeenaMahadik, the Ld. Counsel for the Appellant bank was heard. Additional documents produced by the Appellant under Order 41 Rule 27 of the CPC were received.
The Ld. Presiding Officer has refused to grant a charge over the immovable properties because the Appellant had failed to produce documents pertaining to the sanction given by the members of the 1st defendant society with regard to the properties owned by them. Form of declarations submitted by the members of the society under section 5 (1) in the form of an affidavit has been submitted by all the members of the 1st defendant society the originals together with English translation have been produced and perused. These declarations would undoubtedly indicate the members of the society had offered their lands as security with regard to the loan availed by them through the society. Ms Sabeena Mahadik draws my attention to the relevant provision of Section 48 (a) of the Societies Act, which reads thus:
“48.Charge on immovable property of members borrowing from certain societies
Notwithstanding anything contained in this Act or in any other law for the time being in force, -
(a) any person who makes an application to a society of which he is a member, for a loan shall, if he owns any land or has interest in any land as a tenant, make a declaration in the form prescribed. Such declaration shall state that the applicant thereby creates a charge on such land or interest specified in the declaration for the payment of the amount of loan which the society may make to the member in pursuance of the application, and for all future advances (if any) required by him which the society may make to him such member, subject to such maximum as may be determined by the society, together with interest on such amount of the loan and advances;”
It is in accordance with this provision that each member of the society has executed a form of declaration. It was not produced before the D.R.T. and therefore, taken in evidence at the Appellate stage. The declaration would bind the members of the society who had executed the declaration undertaking to create a charge over their properties. The properties belonging to each member who has executed the declaration are described in the declaration.
Under the circumstances, the decree of the D.R.T. needs to be modified and the properties of Defendants Nos. 1 & 2 as also members of the first Defendant society who have executed the declarations shall remain a charge for the amount due to the Applicant Bank.
The Appeal is allowed as above. A modified recovery certificate of recovery shall be issued by the D.R.T.