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Judgment
Murlidhar Rao, J.-Unsuccessful plaintiff is the appellant. Plaintiff-Syndicate Bank is a nationalised bank; it instituted the suit on 2-6-1987, for recovery of money from defendants 1 to 13. The first defendant is a Co-operative Society registered under the Karnataka Co-operative Societies Act, 1959. Defendant-4 was the President of the Society. The President and members of the Managing Committee, in pursuance of resolution dated 6-6-1979, borrowed a sum of Rs. 1,58,000/- at 10 1/2% interest per annum to be repaid in five equal annual instalments commencing from 30th May, 1980. They jointly executed a promissory note on 8th June, 1979. Defendants 2 and 3 are the Secretary and Chairman of the Society, respectively. Defendants 4 to 13 are the members of the Society. It is averred in the plaint that out of the sanctioned loan amount a sum of Rs. 1,51,281-00 has been disbursed, from time to time, to defendants 4 to 13 i.e. members. On 8th June, 1979, they also executed personal guarantee bonds in favour of plaintiff. Properties in Plaint ''A'' and ''B'' Schedules are those given as security to the plaintiff for due discharge of loan amounts taken. The defendants while admitting the loan transaction, contended that suit is untenable and is liable to be dismissed. There were other contentions also. On the preliminary question regarding maintainability, issue No. 4 was framed. After hearing the arguments, the learned Judge has held that suit is not maintainable; accordingly it is dismissed.
Mr. Ashwathram, learned Counsel for appellant, submitted that the decision of the Court below is erroneous. Alternatively, he submitted that if the suit is not maintainable on the ground that the Court had no jurisdiction, the plaint could have been returned for presentation to proper Court or it could have been rejected under O. 7, R. 11(d), C.P.C.
As our decision on the said submissions has to solely rest on the construction to be placed on the relevant statutory provisions, we propose to dispose of the appeal accordingly at the stage of admission itself.
We are mainly concerned with Karnataka Co-operative Societies Act, 1959 (Act 11 of 1959) (hereinafter called ''K.C.S. Act'') which came into force on 1st June, 1960, and Karnataka Agricultural Credit Operations and Miscellaneous Provisions Act, 1974, Act 2 of 1975 (hereinafter called "Credit Operations Act"), which came into force on 17th July, 1975. by Section 17 (Chapter 4) of Credit Operations Act, certain provisions of K.C.S. Act were amended by inserting couple of new provisions. Therefore, the provisions of K.C.S. Act, 1959, have to be read with these insertions. Relevant provisions are:
"K.C.S. Act, 1959-Section 2(e-1)-''credit agency'' means a credit agency as defined in the Karnataka Agricultural Credit Operations and Miscellaneous Provisions Act, 1974; and in the latter Act (Act 2 of 1975) it is defined to mean:
(i) a banking company as defined in the Banking Regulation Act, 1949;
(ii) the State Bank of India constituted under the State Bank of India Act, 1955;
(iii) Subsidiary Bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959;
(iv) a corresponding new bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970;"
Clause (f) of this Act (2 of 1975) defines ''financial assistance'' as:
Murlidhar Rao, J., delivered the following:
"(f) "financial assistance" for the purpose of this Act means, assistance granted whether by way of loans, advances, guarantee or otherwise for agricultural purposes." In the instant case, plaintiff-Syndicate Bank is the "credit agency".
Section 70(1) of the K.C.S. Act, 1959, provides for the settlement of disputes. Clause (d) of this section reads thus:
"70(1)(d): between the society and any other co-operative society or a credit agency such dispute shall be referred to the Registrar for decision and no Court shall have jurisdiction to entertain any suit or other proceeding in respect of such dispute".
(emphasis supplied)
Sub-section (2) of this section enumerates claims which are "deemed" to be disputes touching the constitution, management and business of co-operative society. On the admitted facts, the claim between the credit agency and society being a ''dispute'' it is not necessary to consider whether the deeming provision is attracted or not. The provisions of Section 71-B of K.C.S. Act, which are an insertion by Act 2 of 1975, and bear on the point, read thus:
"71B. Powers of credit agency to proceed against members of a co-operative society for the recovery of money due to it from such society.-(1) If a co-operative society is unable to pay its debts to a credit agency by reason of its members committing default in the payment of the moneys due by them, the credit agency may direct the committee to take proceedings against such member under Section 70 or initiate proceedings under Section 101, as the case may be, and if the committee fails to do so within a period of ninety days from the date of receipt of such direction the credit agency may itself proceed against such defaulting members under Section 70 or Section 101, as the case may be, in which case, the provisions of the Act, the rules or the bye-laws shall apply as if all references to the co-operative society or its committee in the said provisions, were reference to the credit agency.
(2) Where a credit agency has obtained a decree or award against a co-operative society in respect of money due to it from the co-operative society the credit agency may proceed to recover such moneys firstly from the assets of the co-operative society and secondly from the members of the co-operative society to the extent of their debts due to the society."
Sub-section (2) makes it clear that the decree or award obtained by credit agency enables the credit agency to proceed to recover the money firstly from the assets of society and secondly from its members, to the extent of their debts to the society.
Chapter 3 of the Credit Operations Act, 1974 (Act 2/75) provides the procedure of recovery of dues by credit agency. Rule 3 of Karnataka Agricultural Credit Operations and Miscellaneous Provisions Rules, 1975 provides for procedure for distraint and sale of moveables. Therefore a overall reading of both the Acts and Rules makes it manifest that a credit agency is not required to institute a suit and enter the long-drawn litigation. Its remedy for the recovery of moneys lent having been provided in these enactments, it has to have recourse to the special machinery which is more expedient. The object of enacting the Credit Operations Act, 1974 (Act 2 of 75) is to facilitate flow of credit for agricultural production and development and for matters connected therewith. The loan in this case is obtained for digging borewells, purchase of submersible pumpsets, sprinkler sets and construction of pumphouses etc. The loan given by the plaintiff is a financial assistance to the society and its members. Therefore the unpaid amount of such dues can be realised by resorting to the provisions of Act and Rules. By this procedure payment of Court-fee, which will be an additional burden, can be avoided. Therefore, remedy of a civil suit is unavailable to a credit agency.
Apart from the prohibition contained in latter part of clause (d) of Section 70, K.C.S. Act, 1959, Section 118 of that Act specifically excludes the jurisdiction of the Civil Court, for which a provision is made in the Act. Thus examined, the Court below was right in holding that the suit by the plaintiff-Bank was not maintainable.
Mr. Ashwathram, however, contended that suit having been based on acknowledgment dated 3rd April, 1984, is maintainable. As mentioned earlier, the loan is obtained on 8-6-1979; the last instalment was due on 30-5-1984. This acknowledgment is obtained one month before the due date of last instalment. Suit is filed on 2-6-1987. The dispute under Section 70 of the K.C.S. Act, 1959, has to be referred within six years from the date of accrual of cause of action. The ''cause of action'' is non-payment of instalment to discharge loan, based on the pronote. The acknowledgment extends the period of limitation only in respect of suits. By Section 119, K.C.S. Act, 1959 only the provisions of Sections 4, 5, 12 and 14 of the Limitation Act are made applicable to the filing of any appeal or revision under that Act. Hence, there is no merit in the contention. It is rejected.
It was also contended that the borrower is the society and its members are impleaded as they are guarantors. Even in such a case it is possible for the C redit Agency to obtain an award under the K.C.S. Act and initiate recovery proceedings against the guarantors. Though under Section 71(4) in respect of a dispute arising under clauses (a) and (b) of Section 70, suits can be filed in a Civil Court, after obtaining the permission of Registrar and after making out a ground that no relief could be granted in respect of certain persons who cannot be made parties to the dispute in respect of dispute between Credit Agency and Society or its members coming under clause (d) of Section 70(1) of the K.C.S. Act, 1959 it cannot be done so.
After considering the matters in all its aspects, we do not find any good ground to admit this appeal.
Mr. Ashwathram''s contention that plaint should have been returned for presentation to proper Court does not appeal to us. The finding is regarding maintainability of the suit in Civil Court and not one of jurisdiction of Court to entertain the suit. However, we accept Mr. Ashwathram''s contention that the case comes under clause (d) of Rule 11 of Order VII of the the C.P.C. and direct that the dismissal of the suit by the Court below be treated as rejection of the plaint.
Subject to the above direction, this appeal fails and is dismissed without being admitted.
Appeal dismissed.