Court’s Decision
The High Court set aside the orders granting recovery certificates issued under Section 101 of the Maharashtra Co-operative Societies Act, 1960. It held that the Deputy Registrar failed to comply with the mandatory procedure under Rules 86A–86F of the Maharashtra Co-operative Societies Rules, 1961, and issued the certificate without recording reasons or considering the defence raised. The Court ruled that this amounted to non-application of mind and a serious violation of natural justice.
The matter was remanded for a fresh denovo inquiry, with a direction to pass a reasoned judgment within four weeks.
Facts
A co-operative bank initiated proceedings for the recovery of loan amounts allegedly due from several individuals. It claimed that they had obtained the loan, executed loan documents including a demand promissory note, and failed to repay. Notice of recovery was issued, and the bank filed an application under Section 101 to obtain a recovery certificate.
Some individuals appeared before the Registrar and categorically denied the loan disbursement. They asserted that the records produced by the bank were fabricated, the loan was disbursed contrary to by-laws permitting only single-member lending, and the loan amount was transferred to bank employees’ accounts. They raised serious allegations of fraud, irregularities in instalment calculations, incorrect sanction details, and misuse of the bank system. They contended that disputed factual issues required adjudication under Section 91 and that a recovery certificate could not be issued unless the bank proved its documents and accounts.
Despite these objections, the Deputy Registrar granted the recovery certificate without dealing with the defences or providing reasons.
Issues
- Whether a writ petition is maintainable despite the availability of a revisional remedy under Section 154 of the Act.
- Whether the Deputy Registrar followed the mandatory procedure under Rules 86A–86F before issuing the recovery certificate.
- Whether the absence of recorded reasons amounts to a violation of natural justice.
- Whether the existence of genuine factual disputes precluded the Registrar from exercising jurisdiction under Section 101.
Petitioner’s Arguments
It was argued that the Registrar completely failed to comply with Rules 86A–86F. The bank’s application did not include certified true copies of essential documents as mandated by Rule 86A. The petitioners had filed a detailed defence disputing the loan, alleging forgery and manipulation of accounts by bank employees, and pointing to violations of by-laws restricting loan disbursements to a single member. They maintained that such serious disputes could not be adjudicated summarily under Section 101 and required adjudication under Section 91.
The petitioners emphasised that Rule 86E obligates the society to prove its application and the Registrar to issue a reasoned judgment considering the defence. Instead, the Registrar merely reproduced their reply in the first part of the order but did not examine or decide the issues raised. They relied on multiple precedents holding that recovery certificates cannot be issued without following mandatory procedure and without a proper judgment.
Respondent’s Arguments
The bank opposed the writ petition, arguing that an alternative remedy under Section 154 was available and the present writ petition was an attempt to avoid the mandatory 50% pre-deposit. It submitted that the petitioners had been given an opportunity of hearing and that the Registrar had applied his mind and issued the certificate after due consideration. It maintained that Section 101 proceedings are intended to be summary in nature and do not require elaborate reasoning, and that all requisite documents supporting the loan recovery had been filed.
Analysis of the Law
The Court examined Section 101 and Rules 86A–86F governing recovery certificate proceedings. It reiterated that although Section 101 provides a summary remedy, the Registrar acts as a quasi-judicial authority and must comply strictly with procedural requirements. Rule 86E mandates that once defence is filed, the applicant-society must prove the contents of its application and the Registrar must deliver a reasoned judgment before issuing the certificate.
The Court held that an order under Section 101 cannot be passed mechanically. The Registrar must examine whether the defence raises bona fide disputes, particularly where allegations include fraud, forged documents, or violations of by-laws—all of which cannot be summarily resolved. If such disputes arise, the Registrar’s jurisdiction ceases, and the dispute must proceed under Section 91.
Precedent Analysis
Top Ten Firm
Held that the Registrar’s jurisdiction under Section 101 is limited to verifying undisputed arrears; if genuine factual disputes arise, the application must be rejected and relegated to Section 91.
Relevance: Petitioners raised disputes regarding fraud, forged documents, and irregular disbursement.
Sundip Polymers
Held that recovery certificates issued without following Rules 86A–86F and without recording reasons are invalid.
Relevance: Registrar failed to comply with these rules and issued a non-reasoned order.
Kranti Associates
Reaffirmed that all quasi-judicial authorities must record reasons as part of natural justice.
Relevance: Registrar issued a certificate without deliberation or reasons.
Other Bombay High Court decisions
Consistently hold that procedural non-compliance and non-application of mind render Section 101 orders unsustainable.
Court’s Reasoning
The Court found that although the Registrar recorded the defence tendered by the petitioners, the reasoning portion of the order showed no application of mind. The Registrar failed to deal with allegations of fraud, discrepancies in sanction and disbursement, by-law violations, or claims that loan amounts were transferred to bank employees’ accounts.
The Court held that it was obligatory for the Registrar to examine the defences and record reasons for accepting or rejecting them. Issuing a certificate without doing so violated Rule 86F and the principles of natural justice. The order was mechanical, unreasoned, and could not be treated as a “judgment” under the statute. The Court reiterated the principle that “recording of reasons is an integral facet of fairness” and essential for judicial review.
Conclusion
The High Court held that the impugned recovery certificate was issued in breach of mandatory procedural rules, without reasoning, and in violation of natural justice. The order was quashed, and the matter was remanded to the Deputy Registrar for denovo adjudication. The Registrar was directed to follow Rules 86A–86F and pass a reasoned judgment within four weeks.
Implications
- Recovery proceedings under Section 101 cannot be mechanical; they require strict statutory compliance.
- Registrars are bound to record reasons when adjudicating contested matters.
- Serious disputes regarding fraud, forgery, and by-law violations must be adjudicated under Section 91.
- Writ jurisdiction is maintainable where procedural mandates and natural justice are violated.
FAQs
1. Can a Section 101 recovery certificate be challenged in a writ petition?
Yes. When there is clear procedural illegality or violation of natural justice, a writ petition is maintainable despite availability of revision.
2. Must the Registrar record reasons while issuing a recovery certificate?
Yes. Rules 86A–86F and binding precedents require a reasoned judgment before issuing the certificate.
3. When must the Registrar refuse to issue a recovery certificate?
When the defence raises bona fide disputes requiring detailed adjudication, such as allegations of fraud, forgery, or factual inconsistencies.
