w w w . L a w y e r S e r v i c e s . i n



Shah Jayantilal Chimanlal v/s The Ranuj Nagrik Sahakari Bank Ltd. & Others


Company & Directors' Information:- R J SHAH AND COMPANY LIMITED [Active] CIN = L45202MH1957PLC010986

Company & Directors' Information:- SHAH INDIA PVT LTD [Active] CIN = U51909WB1960PTC024535

Company & Directors' Information:- B. B. SHAH PRIVATE LIMITED [Active] CIN = U17117RJ1984PTC002922

Company & Directors' Information:- D M SHAH & COMPANY PVT LTD [Active] CIN = U29244WB1988PTC045183

Company & Directors' Information:- N CHIMANLAL AND CO PRIVATE LIMITED [Active] CIN = U33110MH2005PTC158466

Company & Directors' Information:- C. M. SHAH AND COMPANY PRIVATE LIMITED [Strike Off] CIN = U74140MH1971PTC015107

Company & Directors' Information:- T M SHAH PRIVATE LIMITED [Strike Off] CIN = U10101UP1966PTC003139

Company & Directors' Information:- S B SHAH AND COMPANY PRIVATE LIMITED [Active] CIN = U51496DL1991PTC045040

Company & Directors' Information:- H B SHAH PRIVATE LIMITED [Active] CIN = U36100MH1947PTC005536

Company & Directors' Information:- M M SHAH PRIVATE LIMITED [Strike Off] CIN = U51311MH1962PTC012293

Company & Directors' Information:- D J SHAH AND CO PRIVATE LIMITED [Active] CIN = U74899DL1987PTC030169

Company & Directors' Information:- C C SHAH LTD. [Strike Off] CIN = U15421WB2000PLC007659

Company & Directors' Information:- A H SHAH AND CO PVT LTD [Active] CIN = U51311MH1949PTC007019

Company & Directors' Information:- SHAH AND SHAH PVT LTD [Strike Off] CIN = U33112WB1980PTC032838

Company & Directors' Information:- A D SHAH PVT LTD [Strike Off] CIN = U51909MH1972PTC015715

Company & Directors' Information:- B. SHAH AND COMPANY LIMITED [Dissolved] CIN = U99999MH1952PLC008789

    Second Appeal No. 84 of 2016

    Decided On, 20 August 2019

    At, High Court of Gujarat At Ahmedabad

    By, THE HONOURABLE MR. JUSTICE PARESH UPADHYAY

    For the Appellant: Mehulsharad Shah, Advocate. For the Respondents: R1 & R2, Ankit Shah, R3 & R4, Amit R. Joshi, R5, P.B. Velani, Advocates.



Judgment Text


1. This Second Appeal is filed by the original plaintiff and is directed against the concurrent findings of both the Courts below.

1.2 The plaintiff had filed Regular Civil Suit No. 3 of 2005 in the Civil Court at Shihori (District : Banaskantha) seeking declaration and permanent injunction against the defendant - Ranuj Nagrik Sahakari Bank Limited (the Peoples’ Co-operative Bank). The declaration sought for by the plaintiff was principally to the effect that, a Co-operative Bank can not invoke the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for short ‘the SARFAESI Act’) and therefore the proceedings instituted/undertaken by the defendant - Co-operative Bank, qua the suit property, was non-est/impermissible.

1.3 In the said suit, an application Exh.44 under Order VII, Rule 11(d) of the Code of Civil Procedure, 1908 was filed, purportedly by the defendant No. 1 - Bank. The said application was allowed by the Trial Court vide order dated 22.12.2010. As the consequence thereof, the plaint of Regular Civil Suit No. 3 of 2005 stood rejected vide judgment and decree dated 22.12.2010 passed by the Principal Senior Civil Judge, Shihori (District : Banaskantha).

1.4 The said order of the Trial Court dated 22.12.2010 was challenged by the original plaintiff before the District Court by filing Regular Civil Appeal No. 2 of 2011. The said appeal is dismissed by the 7th Additional District Judge, Banaskantha at Deesa vide Judgment and decree dated 29.2.2016.

1.5 The above orders/judgment and decree are challenged in this Second Appeal by the original plaintiff.

2. After hearing learned Advocates for the respective parties at length, while admitting this appeal, the following substantial questions of law were framed by this Court.

(i) Whether the provisions of SARFAESI Act is applicable to the Co-operative Bank and whether it is permissible for the Co-operative Bank to initiate proceedings under the SARFAESI Act and to auction the property?

(ii) Whether, in the facts and circumstances of the case, any notice was required to be issued to the respondent Bank, before instituting the suit of the present nature and having the prayers in the suit, as contemplated under the provisions of the Gujarat Co-operative Societies Act ?

(iii) Whether, in the facts and circumstances of the case, the respondent Bank can be said to have raised specific objection regarding the pre-requisite of notice under the provisions of the Gujarat Cooperative Societies Act and whether it was open for the private defendant to raise an objection regarding the pre-requisite of notice under the provisions of the Gujarat Co-operative Societies Act and whether suit can be dismissed on the ground of non-issuance of notice to the Bank before filing the suit ?

3.1 Mr. Mehul Sharad Shah, learned Advocate for the appellant - original plaintiff has submitted that, a Co-operative Bank can not invoke the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and therefore the proceedings instituted/undertaken by the defendant - Co-operative Bank qua the suit property was non-est. It is submitted that, the order of the Trial Court to this extent is not confirmed by the Appellate Court below and there is no cross-objection by the respondent in this appeal, in that regard. It is further submitted that no notice was required to be given to the defendant - Bank under the provisions of the Gujarat Co-operative Societies Act, 1961, before instituting the suit. It is submitted that, there was specific mention in this regard in the suit itself. Attention of this Court is invited to Para 12 of the plaint. It is submitted that both the Courts below fell in error on this aspect. It is submitted that the substantial questions of law, as noted above, be answered in favour of the appellant.

3.2 It is further submitted that, the impugned orders of both the Courts below are unsustainable also considering the fact that, the application Exh.44 was not given by the respondent Bank and a private defendant could not have given such an application. Attention of the Court in this regard is invited to the contents of the purshis - Exh.7 (dated 28.1.2011) tendered on behalf of the respondent Bank to the District Court in Regular Civil Appeal No. 2 of 2011. Attention of the Court is also invited to the contents of Exh.95 (dated 15.3.2014) on the record of the District Court, more particularly Para 12 thereof.

3.3 It is submitted that, even on merits, the institution of proceedings by the respondent Bank lacked bona fide. In this regard, it is submitted that, the so-called outstanding loan was less than Rs.75,000/-. Though the appellant had not taken any loan from the respondent - Bank, he had informed the Bank, from the beginning that, he is ready and willing to pay the outstanding amount i.e. Rs.75,000/-, claimed to have been due and payable to the Bank, on behalf of the loanee i.e. the original defendant Nos. 3 and 4. It is submitted that the respondent Bank was not interested in getting their outstanding loan back, but was facilitating the siphoning of the small plots by the private defendant, in a sham and bogus auction proceedings, for the so-called outstanding amount of less than Rs. 75,000/-. It is noted that, learned Advocate for the appellant has extensively taken this Court through the paper work done by the Bank to create a show that the suit property was auctioned in a transparent manner.

3.4 Learned Advocate for the appellant has also submitted that, without remanding the matter back for adjudication by the Trial Court, the suit be decreed by this Court in exercise of powers under Order 41, Rule 33 of the Code of Civil Procedure, 1908.

3.5 Learned Advocate for the appellant has relied on the following authorities in support of his submissions.

(i) II (2014) BC 303 (DB) (GUJ.)=2013(3) GLR 2337, Administrator – Shri Dhakdi Group Co-operative Cotton Seed v. Union of India

(ii) 2004 (DLT SOFT) 4726 (Guj.)=2005(1) GLH 68, Mistry Jayantilal Maganlal v. Prajapati Kantilal Haribhai

(iii) 2013 (DLT SOFT) 768 (Guj.)=2013(2) GLR 1386, Banaskantha District Oil Seeds Growers Cooperative Union v. Krishna Oil Mills

(iv) 2003 (DLT SOFT) 3960=2003 (2) GLH 58, Vimal Cooperative Housing Society Ltd. v. Rajendra kumar Shankerbhai Bhagiya

4. Mr. Ankit Shah, learned Advocate for the original defendant Nos. 1 and 2 (the Bank) - the present respondent Nos. 1 and 2 has contested this appeal and has submitted that, the Bank had validly undertaken the auction proceedings under the SARFAESI Act and that, the notice under the Gujarat Co-operative Societies Act should have been given by the plaintiff to the Bank before instituting the suit. It is submitted that none of the Courts below can be said to have committed any error, which may call for any interference by this Court. It is submitted that the substantial questions of law be answered against the appellant and this appeal be dismissed.

5. Mr. Amit R. Joshi, learned Advocate for the respondent Nos. 3 and 4 has submitted that, his clients have already disposed of the property and therefore, he may not have anything to say in the matter.

6. Mr. Pankaj B. Velani, learned Advocate for the respondent No. 5.1 - legal heir of the original defendant No. 5 has submitted that, he has purchased the suit property in the auction proceedings held by the Bank and therefore he is a bona fide purchaser. It is submitted that none of the Courts below can be said to have committed any error which may call for any interference by this Court. It is submitted that this appeal be dismissed. Reliance is placed on the decision of Chhattisgarh High Court in the case of Victor Christiyan v. Authorised Officer, Laxmi Nagrik Bank Maryadit, recorded on Writ Petition (Civil) No. 5527 of 2010 dated 9.1.2018.

7. Having heard learned Advocates for the respective parties and having considered the material on record, this Court finds that, the substantial questions of law as framed by this Court, as noted above, need to be answered as under.

8.1 The first substantial question of law reads as under:

“Whether the provisions of SARFAESI Act is applicable to the Co-operative Bank and whether it is permissible for the Cooperative Bank to initiate proceedings under the SARFAESI Act and to auction the property?”

8.2 Similar question had earlier cropped up before this Court.

The Division Bench of this Court in the case of Administrator, Shri Dhakdi Group Co-operative Cotton Seed v. Union of India (supra), has answered it as under.

“23. On consideration of the entire materials on record, we hold that the Notification dated 28th January, 2003 issued by the Central Government impugned in these writ applications is ultra vires, unconstitutional, non est, and void ab initio and the respondent - Co-operative Banks are restrained from taking any action against its members under Section 13(4) of the Securitization Act.”

8.3 The law laid down by the Division Bench of this Court applies with full force in the present case as well. The first substantial questions of law as noted above, can not and need not be gone into again, by this Court. The said question has already stood answered by the Division Bench of this Court as noted above. Consequently, the plaintiff would be entitled to get the declaration as prayed for by him to the effect that, the defendant Co-operative Bank could not have invoked the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and further that, all the proceedings instituted/undertaken by the defendant - Cooperative Bank, qua the suit properties, including its attachment and auction, was without authority of law and was therefore non-est.

8.4 While confirming the judgment and decree of the Trial Court, the District Court has also held that, the plaint could not have been rejected on this count. There is no cross-objection to this. This is an additional factor in favour of the appellant and against the defendants.

9.1 The second substantial question of law reads as under:

“Whether, in the facts and circumstances of the case, any notice was required to be issued to the respondent Bank, before instituting the suit of the present nature and having the prayers in the suit, as contemplated under the provisions of the Gujarat Co-operative Societies Act?”

9.2 Having answered the first question as above, this second question may be of less relevance. However, even the said question is also answered by this Court earlier. As noted above, though no specific contention was taken in this regard, the Trial Court had allowed the application Exh.44 inter alia on the ground that, notice under the Gujarat Co-operative Societies Act was not given and thus the suit was accordingly barred. In view of the decision of this Court in the case of Vimal Cooperative Housing Society Ltd. v. Rajendrakumar Shankerbhai Bhagiya (supra), such an aspect could not have been decided at the stage of an application under Order 7, Rule 11 of the Code of Civil Procedure, 1908. This Court further finds that, even at the time of trial, this argument was not available to the defendant keeping in view the decision of this Court in the case of Banaskantha District Oil Seeds Growers Cooperative Union v. Krishna Oil Mills (supra). In the present case, it could not be said that, the suit in question was in respect of any act touching the business of the respondent - Bank. For this reason, this question is answered by holding that, in the facts and circumstances of the case, no notice was required to be issued to the respondent - Bank, before instituting the suit of the present nature, as contemplated under the provisions of the Gujarat Co-operative Societies Act.

10.1 The third substantial question of law reads as under :

“Whether, in the facts and circumstances of the case, the respondent Bank can be said to have raised specific objection regarding the pre-requisite of notice under the provisions of the Gujarat Co-operative Societies Act and whether it was open for the private defendant to raise an objection regarding the pre-requisite of notice under the provisions of the Gujarat Co-operative Societies Act and whether suit can be dismissed on the ground of non-issuance of notice to the Bank before filing the suit?”

10.2 Having answered the second question as above (vide Para : 9.2), this question would be academic. Still this Court has verified the original record. The plain reading of the application Exh.44 makes it clear that, the entire thrust was on SARFAESI Act and there was no specific objection under the Gujarat Co-operative Societies Act. There was only passing reference in this regard. The application Exh.44 therefore could not have been allowed by any of the Courts below on this count. This question is answered accordingly. This is over and above the finding to the effect that, whether application Exh.44 could be said to have been given by the Bank itself is in doubt. The Bank had already declared before the Appellate Court below that no such application was given by or on behalf of the Bank. Subsequent purshis to the effect that, the earlier declaration is not pressed, is of no consequence for an aspect as to whether such an application, in fact was given by the Bank or not. Be that as it may, having answered the first two questions as above, this aspect does not change the complexion of the matter.

11. In view of above, the judgment and decree of both the Courts below are required to be quashed and set aside. The consequence thereof would be that, the matter may be required to be remanded to the Trial Court for adjudication of the suit, after full-fledged trial. At this stage, the request made on behalf of the appellant needs to be considered that the declaration as prayed for in the suit be given by this Court in exercise of powers under Order 41, Rule 33 of the Code of Civil Procedure, 1908. This Court finds that, no useful purpose would be served by asking the Trial Court to decide those issues, which are already answered by this Court, as noted above. Under these circumstances, this Court has thought it proper to exercise the powers under Order 41, Rule 33 of the Code of Civil Procedure, 1908, and pass appropriate order in the suit, in this appeal.

12. In view of above, appropriate order is passed as recorded in Paras 13 and 14. However, before doing so, few glaring aspects need to be noted by this Court. It is noted that, while framing substantial questions of law (vide order dated 19.7.2019), this Court had also observed that, the aspect of abuse of process of law by the parties to the litigation also needs to be gone into by this Court. This Court finds that, without going into that question, this appeal can be decided and even the suit can be decreed and therefore, this aspect of abuse of process of law is not stretched further and the matter is left by only recording few facts in that regard. They are as under.

12.1. The auction proceedings in question, which was held to be without any authority of law, was even otherwise not legal. The show of the so called auction in question, ultimately culminated into the disposal of the suit property in favour of the original defendant No. 5 (Mr. Anilkumar Bachubhai Velani). He is the real brother of the panel Advocate of the respondent - Bank. The said panel Advocate is claimed to have appeared on behalf of the Bank (defendant Nos. 1 and 2), so also his brother – defendant No. 5, before both the Courts below. The Vakalatnama is also common, not only for defendant Nos. 1 and 2, but qua defendant Nos. 1, 2 and 5. On behalf of the defendant No. 5, the panel Advocate (Mr. P.B. Velani) has signed at both the places i.e. for the defendant No. 5 (as Power of Attorney holder of defendant No. 5) authorizing Mr. P.B. Velani, learned Advocate to appear on behalf of Mr. A.B. Velani, and also as the person accepting the said authorization (as an Advocate). The matter does not end there. The Trial Court rejected the plaint on the basis of an application Exh. 44 (under Order 7 Rule 11 of CPC) claimed to have been given by the defendant - Bank, though before the District Court, it was declared on behalf of the Bank that no such application was ever given by the Bank. The said pursis further declared that Mr. P. B. Velani was not even engaged as an Advocate to represent the Bank. The respondent No. 2 however subsequently stated that ‘it is not pressed’. Still further, on the death of the original defendant No. 5, the person who has come on record as his legal heir is the wife of the panel Advocate (Mrs. Swatiben Pankajkumar Velani). The reason for doing so, as indicated on her behalf, as put forward by Mr. P.B. Velani, learned Advocate is that, there was Will to that effect by the original defendant No. 5. The original defendant No. 2, who was the officer of the Bank, is indicated to have now crossed the age of superannuation. The said person is now elevated as the Joint Managing Director of the respondent - Bank, as is evident from the affidavit filed by him dated 1.8.2019. There is connivance, if not by the respondent - Bank as an institute, atleast of the respondent No. 2 with the original defendant No. 5 and the said design is executed through the brother of the original defendant No. 5, husband of now respondent No. 5.1 (legal heir), for the reasons, which are writ large, as noted above. This Court has restrained itself from imposing cost against the respondents - defendant Nos. 1, 2 and 5.

13. For the reasons recorded above, the following order is passed.

13.1 This Second Appeal is allowed.

13.2 The judgment and decree dated 29.2.2016 passed by the 7th Additional District Judge, Banaskantha at Deesa recorded on Regular Civ

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il Appeal No. 2 of 2011 is quashed and set aside. 13.3 The order dated 22.12.2010 passed by the Principal Senior Civil Judge, Shihori below Application Exh. 44 (under Order 7, Rule 11(d) of the Code of Civil Procedure, 1908) is set aside. The said application is dismissed. 13.4 Consequently, the judgment and decree dated 22.12.2010 passed by the Principal Senior Civil Judge, Shihori (District : Banaskantha) recorded on Regular Civil Suit No. 3 of 2005, rejecting the plaint thereof, is quashed and set aside. 13.5 As the consequence of the above, the suit may be required to be tried by the Trial Court, however considering the fact that the declaration asked for by the plaintiff is a pure question of law, which is already answered by the Division Bench of this Court, in the case of Administrator-Shri Dhakdi Group Co-operative Cotton Seed v. Union of India (supra), and therefore, in exercise of powers under Order 41 Rule 33 of the Code of Civil Procedure, 1908, and for the reasons recorded in this judgment, the following further order is passed. 14.1 It is declared that, the defendant Co-operative Bank could not have invoked the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Consequently, it is declared that all the proceedings instituted/undertaken by the defendant - Co-operative Bank qua the suit properties, including its attachment and auction was without authority of law and was therefore non-est. 14.2 Regular Civil Suit No. 3 of 2005 in the Court of Principal Senior Civil Judge, Shihori, District : Banaskantha is decreed in terms of Para 16(1) and (2) of the said plaint. Parties shall bear their own costs. 14.3 Decree be drawn accordingly. 15. After the pronouncement of this judgment, learned Advocate for the respondent No. 5.1 has requested that this judgment be stayed for some time. In the facts and circumstances of the case noted above, this request is rejected.
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