Merely because the period fixed for liquidation is over, the proceedings for recovery of dues do not stand closed: SC

Supreme Court: When the 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ was called upon to decide whether under the provisions of Section 109 of the Maharashtra Co­operative Societies Act, 1960 on expiry of the period fixed for liquidation, the proceedings for recovery of dues instituted/pending as against the members, shall stand closed, it said,

“the members who have obtained stay in appeal or on recovery proceedings or the case is pending, cannot take advantage of the fact that the period fixed for Liquidator under the Act is over.”

The Court further explained that once a report has been submitted, the Registrar has to take action in terms of the report and in such circumstances when the proceedings for recovery are pending against the members and the Society has taken loan from the banks for its member, the actual money has to go to the creditor i.e., to the bank who is going to be benefitted by recovery of public money in the hands of members. In such cases it would be appropriate for the Registrar to send notice of the proceedings to a person who is to be benefitted from the recovery. It said that merely on the liquidation of Society, or the factum that the period fixed for liquidation is over, liability of the members for the loans cannot be said to have been wiped off. The disbursement of loan in an arbitrary manner and failure to recover was the very fulcrum on the basis of which winding up of the Society was ordered.

It also said,

“The concept of restitution is a common law principle and it is a remedy against unjust enrichment or unjust benefit. The court cannot be used as a tool by a litigant to perpetuate illegality. A person who is on the right side of the law, should not have a feeling that in case he is dragged in litigation, and wins, he would turn out to be a loser and wrong­doer as a real gainer, after 20 or 30 years.”

The Court concluded by saying that though the Liquidator cannot continue once the proceedings are over. Notice in such cases should be issued by the Registrar to the creditors and to persons for whose benefit recovery is to be made, to continue the pending proceedings in the instrumentality of court/tribunals/recovery officers etc.

[Goa State Cooperative Bank v. Krishna Nath A., 2019 SCC OnLine SC 1058, decided on 20.08.2019]

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