REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

I. A. No. 1 IN CIVIL APPEAL No. 3303 OF 2005

Indian Bank …                 Appellant(s)

Versus

Godhara Nagrik Coop. Credit  Society Ltd. & Anr. etc. etc. …             Respondent(s)

WITH

I. A. No. 1 IN CIVIL APPEAL No. 3336 OF 2005,  I. A. No. 1 IN CIVIL APPEAL No. 3337 OF 2005 AND

I. A. No. 1 IN CIVIL APPEAL No. 3338 OF 2005

O R D E R

1] Indian  Bank  has  filed  these  applications  praying  for

clarification  of  certain  directions  contained  in  the  final

judgment dated 16.05.2008 of this Court in Civil Appeal No.

3303/2005  along  with  Civil  Appeal  Nos.  3336,  3337,  3338

and 3304-3335 of 2005.  

2.1]   Respondents herein are cooperative societies registered

under  the  Cooperative  Societies  Act.  They deposited  certain

amounts in cash in fixed deposits  of  Banks wherefor  Fixed

Deposit Receipts (FDRs) were to be issued. Such deposits were

made  through  some  so-called  Commission  Agents  of  the

Banks on payment of huge commission which is ordinarily not

allowed by the Nationalized Banks.

2.2] Applications for grant of loans by various persons were

filed  before  the  prescribed  authorities  of  the  banks  on  the

basis of the said FDRs. Allegedly a large number of officers of

the  banks  were  involved  in  a  scam  whereby  unofficial

investments of the said amount were being made.

2.3] As and when the FDRs matured, the investors requested

the Banks for their encashment. The banks refused to accede

thereto stating that the amount under the FDRs had already

been paid by way of loans and, thus, no further amount was

payable. It was contended that a fraud on the banks has been

2

practiced to which the depositors and the officers of the banks

were parties.

2.4] Writ petitions were filed.  A learned Single Judge of the

High  Court  opined  that  serious  disputed  questions  of  fact

being  involved  in  the  said  writ  petitions,  no  relief  can  be

granted to the writ petitioners.

2.5] Despite the same, the learned single judge relying on the

provisions  contained  in  Section  35A  of  the  Banking

Regulations  Act,  1949  directed  constitution  of  a  Committee

under the Chairmanship of the Deputy Governor of Reserve

Bank of India or his nominee to go into the matter in great

details.  Various  powers  were  delegated  in  favour  of  the

Committee  including  the  one  that  the  decision  of  the

Committee shall be final and binding upon the parties.

2.5.1]  A Division Bench of the said Court in an intra court

appeal  preferred  thereagainst,  however,  stayed  only  the

3

operation  of  some  of  the  clauses  of  the  said  order.  The

Committee, however, was allowed to function.

2.5.2]  A  special  leave  petition  filed  thereagainst  has  been

dismissed by this Court with certain observations.

2.6]  The  Committee  submitted its report.  It  was found that

principally  the  officers  of  the  banks  were  involved  in  the

matter of commission of the alleged fraud on the Banks.

2.6.1] Members of the Committee,  however,  differed in their

opinion as to whether, having regard to the limited scope of

the enquiry, any positive direction could be issued.

2.7]  Relying  on  the  report  of  the  Committee,  the  Division

Bench of the High Court opined that as the writ petitioners

were not parties to the fraud, subject to any other or further

orders  that  may be  passed  in  the  criminal  case,  appellant-

banks should be directed to pay the amounts under the FDRs

to the depositors.

4

2.8.1]  Appellants  filed  appeals  aggrieved  by  the  said  order,

upon obtaining special leave thereof.

2.8.2]  On 5th April 2004, a limited notice was issued by this

Court, which is to the following effect:-

“Issue notice on the special leave petition limited to  the  question  as  to  whether  the  High  Court should have directed payment having regard to the fact that the Committee itself had not finally resolved  the  question  of  liability  as  far  as  the disputed amount was concerned.

Issue notice on the prayer for interim relief also.”

2.8.3]  This  Court  in  its  order  dated  10th  December,  2004

explained the said order stating:

“The issue which is now required to be resolved is a narrow one viz. whether the Committee had finally decided that the amounts payable by the Bank (a) were the liability of the Bank and (b) if so, what was the quantum if any, payable by the Bank  to  the  depositors.  Learned  Counsel appearing on behalf of the respondent prays for time till after the vacation.

5

Let the matter appear two weeks after reopening on a miscellaneous day.

There will be interim order staying the operation of the impugned order.”

2.8.4]  However,  by  an  order  dated  9th  May,  2005,  upon

hearing the counsel for the parties, `Leave' was granted, as a

result whereof all the contentions of the parties are now open.

3] Having  heard  the  learned  counsel  for  the  parties  at

length and having noticed and considered the propositions of

law touching the issues involved in these appeals, this Court

allowed the appeals with the following directions [see 2008 (7)

SCALE 363 paras 18,19,20,21,22,& 23 at pgs. 376-377]:-

“18. But  it  is,  in  our  opinion,  not  a  public interest litigation in that sense of the term. The report,  however,  was  not  unanimous.  The opinion of the Committee was a divided one on the crucial issue. Two members of the Committee were  of  the  opinion  that  whether  the  amount deposited by the cooperative banks was received back by them or not, was yet to be ascertained. We are, therefore, of the opinion that it cannot be said that the fact finding body, assuming that the

6

same  could  be  constituted,  made  such recommendations  which  could  be  accepted  by the Court without going into the merit thereof. It is  also  not  a  case  where  any  mandatory  relief could be granted in favour of the respondents.

19.  Having however said so, we must pose unto ourselves  a  further  question.  Could  those cooperative  societies  which  had  absolutely  no role to play in the entire episode should suffer in any  manner  whatsoever?  The  cooperative societies/cooperative  banks  for  the  purpose  of their day-to-day functioning require the amount which  they  have  invested  in  FDRs  on  their maturity. Should they wait till the criminal cases are over? Should they be pushed to institute civil suits? They can indisputably be compensated by grant of  interest.  What,  however,  happens  if  in the  meanwhile  in  the  absence  of  the  requisite funds  being  available  to  them,  they  find  it difficult to run the day-to-day affairs?

20.  Answers thereto may be difficult to find but it is not a wholly impossible task. We think that the  appellant  Bank  being  a  `State'  within  the meaning of Article 12 of the Constitution of India with  the  assistance  of  officer(s)  of  the  Central Bureau of Investigation should make all attempts to  ascertain  as  to  which  of  the  cooperative societies/cooperative  banks  are  in  no  way involved  with  the  scam,  and  subject  to  such precautions  as  may  be  found  necessary  to  be taken, release the amount in their favour.

21.  In any event,  the quantum of the amount which  all  the  depositors  would  have  otherwise received, in the event their investment in FDRs is

7

found  to  be  genuine,  should  be  informed thereabout.  Once  the  liability  of  the  bank  is determined,  the  bank  may  invest  the  said amount in its own account and issue fresh FDRs therefor. Whereas the bank may keep the original FDRs  with  itself,  it  may  issue  the  duplicate copies  thereof  to  the  eligible  cooperative  bank. Such an exercise should be completed within a period of four weeks from date.

22.   In  the  event,  the  cooperative  society intending to avail loan facilities from the banks for running their business, may approach them which may apart from usual  conditions release the same on a further condition that the amount of  FDR  would  remain  with  them  and  on  that basis, loans may be granted of such amount. The usual precautions in regard thereto may also be taken by the Bank(s).

23.   We, while saying so, do not intend to lay down  any  law.  These  directions  should  not  be treated  to  be  precedent.  We  are  issuing  these directions  keeping  in  view  that  the  factual scenario  obtaining  in  the  case  and  that  non- release of the amount is likely to enure hardships that may be  faced by  the cooperative  societies. We  would  also  direct  the  criminal  court  to dispose  of  the  criminal  cases  pending  before them with utmost expedition. These appeals are allowed  with  the  aforementioned  directions. There shall, however, be no order as to costs.”  

4] Applicant-Indian  Bank  by  means  of  these  applications

submits that this Court has proceeded on the basis that in the

8

Indian Bank matters also there was CBI investigation, but in

fact  there  is  no  CBI  investigation  nor  there  are  CBI  cases

registered or pending in respect of the Indian Bank matters.

The applicant-Bank has averred that in the absence  of  any

case pending against the cooperative societies in the Indian

Bank matters  except  one  where  FDRs  were  lost  and  police

case  was  instituted  in  which  the  office  bearers  of  the  said

society was found to be involved by the police and after filing

of the charge sheet, criminal case is pending in the concerned

court, there is no protection of recovery of loan amount by the

Indian Bank from the societies, who are not involved in the

CBI cases.  Further, it is stated that the facts of the cases of

Indian Bank and the Bank of  Baroda were  not similar and

identical.  It appears that in the Bank of Baroda matters some

criminal cases/CBI cases are pending in which some officers

of the Bank of Baroda are involved in the scam without the

fault of  the cooperative  societies  who should not suffer  and

should be paid the FDR amount along with interest.

9

5] The  applicant-bank  next  submits  that  there  is  no

direction in the judgment of this Court dated 16.05.2008 that

the tainted societies will have to file civil  suit and the FDRs

invested as per the directions of this Court will be subject to

the outcome of the suit.  It is also submitted that pursuant to

the judgment passed by this Court the societies involved in

the Indian Bank matters have raised demand notices calling

up  the  banks  to  make  payment  mentioned  in  the  demand

notices and if  the demand of the societies  is accepted then

that  would  amount  to  double  payment  without  there  being

any protection to the bank.  The applicant-bank also submits

that as per its understanding from the text of the judgment,

the  bank  should  proceed  on  the  basis  that  if  the  tainted

societies are innocent and thus to inform them in regard to

the matured amount as on date and then to invest the said

amount  in the  bank in the  form of  FDRs.   The  fate  of  the

invested FDR will be subject to the outcome of the criminal

cases as well  as civil  cases which may be instituted by the

societies.  The applicant-Bank is aggrieved against the above

extracted directions contained in the judgment to the extent

10

that  there  is  no  categorical  direction  that  invested  FDR

amount will be subject to civil or criminal cases.

6] On  the  above-noted  premise,  the  present  applications

have been filed seeking clarification of the directions relating

to the cases of the applicant-Indian Bank.

7] We have heard learned counsel for the parties.

8] In  Para 20 of  the judgment,  the  direction that,  Banks

and CBI  shall  sit  together  and identify cooperative  societies

which are in no way involved in scam, has been issued on the

assumption that CBI has investigated matters pertaining to all

cooperative  societies  and  thus  innocent  societies  can  be

identified  and  the  amount  may  be  paid  to  them.   The

submissions  of  the  applicant-Indian  Bank  pleaded  in  these

applications  that  there  was  no  CBI  investigation/case

pertaining  to  the  matters  of  Indian  Bank  have  not  been

brought to the notice of this Court at the time of hearing and

disposal  of  the  appeals  filed  by the  Indian Bank.   Had the

11

correct statement of facts been pleaded and contended by the

applicant-Indian Bank at the time of hearing of its appeals,

undisputedly there was no occasion for this Court to labour

hard for issuing such a direction pertaining to the cases of the

cooperative  societies-depositors  which  are  not  in  any  way

involved  in  the  scam.   Thus,  applicant-Indian  Bank  has

misrepresented  the  facts  before  this  Court  at  the  time  of

hearing  of  its  appeals  and  now,  after  realizing  its  glaring

mistakes,  these  applications  have  been  filed  for  seeking

clarification of the directions contained in Paras 20, 21 and 22

of the original judgment.

9] Now,  in the background and on reconsideration of  the

factual  situation,  the  direction  contained  in  Para  20  of  the

judgment to the extent that ‘the bank with the assistance of

Officer of the Central Bureau of Investigation should make all

attempts to ascertain as to which of the cooperative societies

and cooperative banks are in no way involved in the scam’,

shall not apply to the cases of the Indian Bank.  The Indian

Bank,  however, in the interest of cooperative societies whose

12

FDRs are lying in deposits and availed the loan facilities, shall

on its  own identify  and ascertain  the  societies  who are  not

involved  in  any  CBI  investigation/case  and  on  such

ascertainment  and  verification,  the  cooperative  societies-

depositors shall  be informed regarding the maturity of their

FDRs.   If  the  maturity  amounts  of  the  FDRs  are  adjusted

against the loan amount advanced to the cooperative societies

and  if  there  exists  any  dispute  between  the  depositors

societies and the Indian Bank about the recovery or payment

of the money, the aggrieved party can get its claim adjudicated

through appropriate proceedings before the appropriate forum

or court as permissible under law.  If there is no dispute in

regard to the payment of amount of matured FDRs, the Indian

Bank  shall  not  debar  or  preclude  the  innocent  cooperative

societies-depositors  from  taking  loan  against  FDRs  being

deposited with the Bank.

10] We make  it  clear  that the  judgment  dated  16.05.2008

shall  stand clarified  to the extent  indicated above  so far,  it

pertains to the cases of Indian Bank.  This clarification will

13

however,  not  dilute  or  affect  other  directions  issued  in  the

final judgment.   

11] In the facts and circumstances of the case for the above-

stated  reasons,  the  applications  filed  by  applicant-Indian

Bank are  allowed.   However,  in  view of  the  conduct  of  the

applicant-Indian  Bank,  it  is  directed  to  pay  cost  of

Rs.20,000/- within four weeks from this order, which shall be

deposited in the account of the Supreme Court Legal Services

Authority.

        …...……..……………………J.                                               (S. B. Sinha)

…...……..……………………J.         (Lokeshwar Singh Panta)

New Delhi, March 24, 2009.

14

15