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Corporate Lawyer: Liquidation of society would not absolve its members from paying their dues; SC.

Supreme Court of India

Justice Arun Mishra, Justice S. Abdul Nazeer and Justice M R Shah

The SC {GOA STATE COOPERATIVE BANK LTD. v. KRISHNA NATH A.(DEAD) THROUGH LRS. AND OTHERS } holds that it   is   open   to   the   bank   to   continue   with   the   recovery proceedings and make recoveries from the defaulting members. Merely on the liquidation of Society, or the factum that the period fixed for liquidation is over, liability of the members for the loans cannot be said to have been wiped off. 

It was held that once a report has been submitted, the Registrar has to take action in terms of the report and in such circumstances when the proceedings for recovery are pending against the members and the Society has taken loan from the banks for its member, the actual money has to go to the creditor i.e., to the bank who is going to be benefitted by recovery of public money in the hands of members. In such cases it would be appropriate for the Registrar to send notice of the proceedings to a person who is to be benefitted from the recovery.

It was further held that the principle of restitution enjoins a duty upon the courts to do complete justice to the party at the time of final decision, and to do away with the effect of interim order in the fact situation of the case. It was observed that no party can take advantage of litigation, it has to disgorge the advantage gained due to delay, in case lis is lost.

In present case, the HC has held that under the provisions of Section 109 of the Maharashtra Co­operative Societies Act, 1960 (hereinafter referred to as ‘the Act’) on expiry of the period fixed   for   liquidation,   the   proceedings   for   recovery   of  dues instituted/pending as against the members, shall stand closed. The said judgment was set aside by the SC.

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