The Supreme Court recently upheld a Bombay HC order, which had held that co-operative banks cannot approach civil courts to recover dues from loan defaulters.
Financial institutions cannot approach civil courts to recover dues
In a major setback to cooperative banks, the Supreme Court recently upheld a Bombay High Court order, which had held that co-operative banks cannot approach civil courts to recover dues from loan defaulters.
The Greater Bombay Co-operative Bank had moved SC challenging the HC order, which stated that co-operative banks cannot approach the civil court for getting its recovery certificate enforced since a separate code exists for the co-operative banks. The HC order was passed in an appeal filed by Gopal Khetan and Vijay Khetan, both directors of Satguru Constructions, against whom the HC had earlier issued arrest warrants for wilful default and non-payment of dues amounting to Rs124 lakh to Greater Bombay Co-op Bank.
The Khetans had challenged the arrest warrants issued by a single judge of the HC stating that the HC does not have jurisdiction to hear cases pertaining to execution of recovery certificate issued under the Maharashtra Cooperative Societies (MCS) Act, 1960.
The HC quashed the arrest warrants and stated that the MCS Act provides in detail the procedure to be followed to make recoveries under the Maharashtra Land Revenue Code by selling and attaching property of the defaulter.
Now that the SC has upheld the HC order, co-operative banks will have to follow the recovery procedure under the land revenue code, which is a rather lengthy process. Ravi Goenka, lawyer for the Greater Bombay Co-op Bank, said the bank has filed an application under Section 269 of the Maharashtra Land Revenue Code before the collector seeking the arrest of the Khetans for wilful default.
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