COURT’S DECISION
The High Court set aside the impugned orders granting recovery certificates under Section 101 of the Maharashtra Co-operative Societies Act, 1960. The Court held that the Deputy Registrar failed to follow the mandatory procedure under Rules 86A to 86F, and crucially, failed to provide any reasoning despite statutory obligation. Considering the violation of natural justice and non-application of mind, the Court directed a denovo inquiry, requiring a fresh, reasoned judgment within four weeks. The Court did not entertain the objection regarding alternate remedy, holding that a writ was maintainable in exceptional circumstances where procedural mandates were ignored.
FACTS
The dispute arose when a co-operative bank initiated proceedings under Section 101 for recovery of loan amounts allegedly due from certain individuals. The bank claimed that the borrowers had executed demand promissory notes, availed the loan, and defaulted on repayment. A recovery notice was issued, followed by an application before the Deputy Registrar seeking issuance of a recovery certificate.
Some of the concerned individuals appeared before the authority and categorically denied the loan disbursement. Their stand was that the loan was never disbursed to them, and documents used by the bank were false and forged. They further asserted that bank employees had transferred the supposed loan amount to their own accounts, raising allegations of fraud, irregularities, and misuse of bank authority. According to them, the dispute required evidence-based adjudication under Section 91, and hence Section 101 could not be invoked.
Despite these assertions and the filing of a detailed defence, the Deputy Registrar granted the recovery certificate in favour of the bank without addressing the substantive defence, discrepancies in loan records, violations of by-laws, or the allegation of fraudulent conduct.
ISSUES
- Whether a writ petition challenging a Section 101 recovery certificate is maintainable despite the availability of a revisional remedy under Section 154.
- Whether the Deputy Registrar followed the mandatory statutory procedure under Rules 86A to 86F while issuing the recovery certificate.
- Whether the Registrar’s failure to record reasons violates principles of natural justice.
- Whether the defence raised by the individuals warranted a deeper inquiry under Section 91 rather than summary issuance of a certificate under Section 101.
PETITIONER’S ARGUMENTS
The petitioners argued that the entire recovery process was vitiated due to procedural lapses and non-compliance with statutory requirements. They pointed out that the bank’s application was not in conformity with Rule 86A, as it did not include certified true copies of essential documents such as loan applications, promissory notes, or written acknowledgments. The petitioners emphasized that they had appeared before the Registrar, filed a detailed defence, and raised substantial disputes regarding the genuineness of the loan transaction, fraud by bank employees, discrepancies in instalment structures, and violations of by-laws permitting only single-member loans.
They submitted that under Rule 86E, the applicant-society must prove the contents of its application, and after considering the defence, the Registrar must deliver a reasoned judgment before issuing a certificate. However, the Registrar merely reproduced parts of the defence but failed to deliberate upon the disputed facts, indicating total non-application of mind.
They relied on several precedents where courts held that recovery certificates issued without following the mandatory procedure under Chapter VIIIA are unsustainable in law.
RESPONDENT’S ARGUMENTS
The bank argued that the writ petitions were not maintainable, urging that an alternative and efficacious remedy of revision under Section 154 should have been invoked. The bank asserted that the petitioners were attempting to avoid the mandatory requirement of 50% pre-deposit before approaching the revisional authority.
The bank contended that all necessary documents had been produced, the petitioners were given adequate opportunity to be heard, and the Registrar had applied his mind. It was submitted that the Registrar is not required to render an elaborate judgment and that Section 101 proceedings are summary in nature, meant to facilitate speedy recovery. They argued that no violation of natural justice had occurred and that the order should not be interfered with in writ jurisdiction.
ANALYSIS OF THE LAW
The Court carefully examined Section 101 and the procedural requirements under Rules 86A to 86F. It emphasised that although Section 101 provides a summary mechanism, the Registrar still carries a quasi-judicial obligation to consider the defence and deliver a reasoned judgment.
The Court highlighted Rule 86E, which mandates that once the defence is filed, the society must prove its claims, respond to defence contentions, and only thereafter can the Registrar issue a reasoned order. The Court observed that none of this had been done. Instead, the Registrar mechanically accepted the bank’s application without addressing the petitioners’ case.
The Court also analysed the jurisdictional parameters laid down in earlier judgments, noting that the Registrar cannot issue a recovery certificate when there exists a bona fide dispute requiring deeper factual evaluation under Section 91.
PRECEDENT ANALYSIS
The Court relied on several judgments:
(i) Top Ten Firm (Division Bench)
Held that the Registrar’s jurisdiction under Section 101 is limited to verifying undisputed arrears. If the defence raises a genuine dispute requiring evidence, the Registrar must decline the certificate.
Relevance: The petitioners had raised allegations of fraud, forged documents, and violations of by-laws — issues beyond summary verification.
(ii) Sundip Polymers
Held that recovery certificates issued without following Rules 86A to 86F and without a reasoned judgment are invalid.
Relevance: The Registrar in the present case failed to render any judicial reasoning.
(iii) Kranti Associates
Held that recording of reasons is an essential part of natural justice for all quasi-judicial authorities.
Relevance: The Registrar’s order lacked reasoning, violating mandated principles.
(iv) Other Bombay High Court precedents
These consistently reaffirm that non-application of mind, absence of reasoning, and violation of statutory procedure render Section 101 orders unsustainable.
COURT’S REASONING
The Court noted that although the Registrar reproduced the defences in the order, there was no application of mind to the issues raised. Allegations of fraudulent disbursement, discrepancies in loan sanctions, by-law violations, and transfer of funds to bank employees deserved deliberation, but the order was silent on these vital aspects.
The Registrar’s reasoning section merely listed documents tendered by the bank and granted the certificate without evaluating their authenticity, relevance, or impact. The Court held that this amounted to a mechanical exercise, contrary to the mandate of Rule 86F requiring a reasoned judgment.
The Court underscored that “recording of reasons is the heart of natural justice” and that orders must appear to be fair, not simply assert fairness. The Registrar’s failure to follow statutory procedure substantially affected the petitioners’ rights, warranting judicial interference.
CONCLUSION
The High Court held the impugned orders unsustainable in law due to:
• Violation of natural justice
• Non-compliance with mandatory Rules 86A–86F
• Total non-application of mind
• Failure to record reasons
Accordingly, the Court quashed the recovery certificates and directed a denovo inquiry, requiring the Registrar to decide the matter afresh through a reasoned judgment within four weeks.
IMPLICATIONS
This judgment reaffirms that:
• Section 101 recovery powers cannot be exercised mechanically.
• Registrars must apply their mind and record reasons in every case.
• Genuine disputes involving fraud, forged documents, or by-law violations must be relegated to Section 91 proceedings.
• Even in summary proceedings, fairness and procedural compliance are indispensable.
FAQs
1. When can a Section 101 recovery certificate be quashed?
A recovery certificate can be quashed when the Registrar fails to follow mandatory procedures under Rules 86A–86F, does not apply his mind, or violates natural justice.
2. Is a writ petition maintainable despite an alternate remedy under Section 154?
Yes. Where the order suffers from procedural illegality, breach of natural justice, or lack of reasoning, writ jurisdiction can be invoked.
3. Does the Registrar need to provide reasons in Section 101 proceedings?
Absolutely. Courts have repeatedly held that recording of reasons is essential, even in summary proceedings.