AI Structured Summary
Not yet generated for this judgment
Judgment
K.S. Jhaveri, J.—By way of these petitions, the petitioner, Gujarat State Financial Corporation (for short, "the Corporation") seeks to challenge the common judgment and order passed by the Gujarat State Co-operative Tribunal, Ahmedabad (for short, "the Tribunal") in Misc. Application Nos. 121/2004 & 122/2004 dated 24.02.2004, whereby, the said applications have been dismissed and the judgment and decree passed by the Board of Nominee at Ahmedabad in Summary Lavad Suit No. 1653/2001 dated 18.08.2003 & Summary Lavad Suit No. 1654/2004 dated 26.09.2003 came to be confirmed.
The petitioner is a Financial Corporation governed by the provisions of the State Financial Corporation Act, 1951 and is a State Government owned Company. The petitioner-Corporation has been incorporated for the purpose of giving financial assistance to new entrepreneurs, who desire to set up their industry within the State of Gujarat and with the object of encouraging the over all development in the State by generating opportunities of employment and to earn revenue.
Some where in 1997 - 1998, one M/s. Parna Industries Ltd., which is a sister concern of M/s. Prasidhi Tea Company Pvt. Ltd., respondent No. 3 herein, approached the petitioner-Corporation for the grant of financial assistance. After scrutinizing the loan documents, the petitioner-Corporation sanctioned the loan vide sanction letter dated 06.02.1998. In accordance with the terms & conditions of the grant of loan, the Company had created equitable mortgage of the immovable property belonging to respondent No. 3 being Bungalow No. 43, situated in "Golden Tulip Co-operative Housing Society Ltd" and having T.P. Scheme No. 21, Vasna, Ahmedabad, in favour of the petitioner-Corporation.
Earlier, the said property was a part of a Society, named, "Hasunagar Co-operative Housing Society Ltd." On or around 10.05.1995, the division of original society, namely, "Hasunagar Co-operative Housing Society Ltd." was effected by the District Registrar of Co-operative Housing Societies, Ahmedabad and pursuant to the said division, the Society was divided into six different Co-operative Societies and one of them was named as "Golden Tulip Co-operative Housing Society Ltd.", of which the disputed property is a part at present.
Upon request of said M/s. Parna Industries Pvt. Ltd., the petitioner-Corporation granted further financial assistance, by way of Working Capital Term Loan of Rs. 130.99 Lacs, after executing necessary security documents, including extension of equitable mortgage, for the purpose of covering up the financial assistance.
In 2001, respondent No. 1 herein, the Gujarat Industrial Co-operative Bank Ltd. (for short, "the Bank") filed suits being Lavad Suit Nos. 1649/2001, 1653/2001 & 1654/2001 against respondent Nos. 2 to 5 before the Board of Nominees for the alleged recovery of its dues. When the petitioner-Corporation came to know about the filing of the aforesaid suits, it filed an application under Order-1 Rule 10 of the CPC for joining as a party-defendant in the said proceedings, which was allowed.
After hearing the respective parties and after considering the evidence on record, the Board of Nominees decreed the suits in favour of respondent No. 1-Bank together with interest, by way of judgment and decree passed in Summary Lavad Suit No. 1653/2001 dated 18.08.2003 & No. 1654/2004 dated 26.09.2003 along with a direction that regarding its claim of having first charge over the disputed property, the petitioner-Corporation shall approach the competent authority concerned.
Being aggrieved by the aforesaid judgment and decrees, the petitioner-Corporation preferred Misc. Applications Nos. 121/2004 & 122/2004 before the Tribunal. After considering the records of the case, the Tribunal dismissed both the applications, by way of common order dated 24.02.2004. Hence, these petitions.
Mr. R. D. Dave, learned Counsel appearing on behalf of the petitioner-Corporation, submitted that the Tribunal as well as the Board of Nominee failed to appreciate the fact that the petitioner-Corporation had first charge over the property in question. He submitted that the claim of respondent No. 1-Bank is void ab initio and cannot be enforced since it is not registered by respondent No. 3 before the competent authority, as required u/s 125 of the Companies Act, 1956.
9.1 Learned Counsel for the petitioner further submitted that the "Golden Tulip Co-operative Housing Society Ltd." came into existence some where around 10.05.1995 pursuant to the division of the erstwhile "Hasunagar Co-operative Housing Society Ltd." into six different Co-operative Societies. Therefore, the "Golden Tulip Co-operative Housing Society Ltd." had the authority to issue Share Certificate in favour of respondent No. 3 at the time of allotment of the property. The respondent No. 3 had only submitted the allotment certificate issued by erstwhile "Hasunagar Co-operative Housing Society Ltd." so as to create equitable mortgage. Neither the charge of respondent No. 1-Bank was registered before the competent authority nor the erstwhile Society had any powers to issue any letter of authority after the date of its division, i.e. 10.05.1995. Therefore, equitable mortgage was not legally and validly created in favour of respondent No. 1-Bank by respondent No. 3. Consequently, respondent No. 1-Bank does not get any right to recover the amount against the disputed property.
9.2 Learned Counsel for the petitioner further submitted that the Tribunal has erred in recording the conclusion that mortgage was created in favour of respondent No. 1-Bank in the year 1997 and that subsequently, for the same disputed property, mortgage was created in favour of the petitioner-Corporation in the year 1998 since the mortgage in question created in favour of respondent No. 1 was not legal and valid.
9.3 Learned Counsel for the petitioner has drawn attention of the Court to the provision of Section 18 of The Gujarat Co-operative Societies Act, 1961 regarding cancellation of registration of amalgamated, divided or converted societies. He has submitted that the loan which was advanced by respondent No. 1-Bank was on the basis of a Share Certificate that was bogus as it was not having any valid and legal title. He has contented that neither the Tribunal nor the Board of Nominee have given their findings on the said issue. Hence, the impugned orders, being illegal and perverse, deserve to be quashed and set aside.
Mr. C. N. Trivedi, learned Counsel appearing on behalf of respondent No. 1-Bank, submitted that the mortgage deed in respect of the disputed property was executed by and between respondent No. 1-Bank and respondent Nos. 2 to 5 herein on 18.09.1997, meaning thereby, that respondent No. 1-Bank had advanced the loan prior in point of time than the petitioner-Corporation. Hence, respondent No. 1-Bank has first charge over the property in question. Learned Counsel has, therefore, submitted that looking to the evidence on record, this Court may not exercise its discretionary powers in the present case.
Heard learned Counsel for the respective parties and perused the documents on record. Along with the affidavit-in-reply filed on behalf of respondent No. 1-Bank, a copy of the Mortgage Deed dated 18.09.1997 executed by and between respondent No. 1-Bank and the Director of respondent No. 3 has been produced. A plain reading of the said Deed goes to show that the financial assistance was advanced by creating equitable mortgage of the disputed property. It is a matter of record that the disputed property was earlier situated in the Society, named, "Hasunagar Co-operative Housing Society Ltd." which was divided into six different Societies on or around 10.05.1995. Pursuant to such division, the disputed property became a part of the new Society, named, "Golden Tulip Co-operative Housing Society Ltd". In the Mortgage Deed dated 18.09.1997 itself, it has been specifically stated that the disputed property is also known as "Golden Tulip Bungalow". The petitioner-Bank had sanctioned loan in the year 1998, viz. after loan was granted by respondent No. 1-Bank, by accepting equitable mortgage of the disputed property. It is established from the records of the case that respondent No. 1-Bank had advanced loan in the year 1997, whereas, the petitioner-Corporation had advanced loan in the year 1998, both by accepting mortgage of the disputed property. It is clear from the records that respondent No. 1-Bank had advanced loan against the disputed property first in point of time as compared to the petitioner-Corporation and therefore, undoubtedly, respondent No. 1-Bank shall have first charge over the disputed property.
The petitioner-Corporation, who was joined as a party-defendant in the proceedings before the Board of Nominee, has not confronted with the Share Certificate that was issued subsequently. In fact, it appears from the record that in the proceedings before the Board of Nominee, the witness of respondent No. 1-Bank was not cross-examined by the other side though the opportunity was given. Moreover, no documentary evidence was also produced by the petitioner-Corporation in support of its case. Therefore, the Board of Nominees had closed the right of cross-examination and production of documents of the petitioner-Corporation. When the petitioner-Corporation has failed to exercise its rights that were available to it before the Board of Nominee in the Lavad proceedings, it cannot be permitted to raise the same at this stage. The petitioner-Corporation ought to have availed the opportunity of cross-examining the witness/s of respondent No. 1-Bank and ought to have produced documentary evidence in support of its case at the relevant time. However, the said opportunity was not availed by it.
It ought to have been that before issuing the new Share Certificate, the Share Certificate issued by the erstwhile Society ought to have been taken back. The non-collection of the Share Certificate issued by the erstwhile Society, gives an inclination to a Member of the reconstituted Society, to avail a loan on the basis of the Share Certificate issued by the reconstituted Society. The laxity on the part of the Society has enabled a Member to commit fraud by taking loan of huge amounts from two different financial institutions / bank by mortgaging the same property. The new Share Certificate was to be issued against the deposit of the old Share Certificate, which has not been done in the present case. Hence, in view of the provision of Section 19 of The Gujarat Co-operative Societies Act, the reliance placed upon the provision of Section 18 of the said Act by learned Counsel for the petitioner-Corporation will not be of any help to the petitioner-Corporation.
Considering the facts of the case and the evidence on record, the respondent No. 1-Bank has first charge over the disputed property. Both the Board of Nominee as well as the Tribunal below have appreciated the evidence on record in its proper perspective and are completely justified in passing the impugned orders. I am in complete agreement with the reasonings given in the impugned orders and hence, find no reasons to interfere with the same.
For the foregoing reasons, both the petitions are dismissed. Rule is discharged. The disputed property has been auctioned pursuant to the orders of this Court. The sale proceeds deposited with the petitioner-Corporation with be paid to respondent No. 1-Bank along with the accrued interest within a period of four weeks from today. With the above direction, the petitions stand disposed of.