Orders disbursal of money to all individual depositors
The Madras High Court Bench here has created a record of sorts by ensuring recollection of over Rs.27 crore from loan defaulters of the now defunct Madurai Urban Cooperative Bank and ordering disbursal of the amount to individual depositors.
A Division Bench of Justices V. Ramasubramanian and V.M. Velumani on Thursday directed the liquidator of the bank to disburse Rs.9.18 crore to individual depositors besides paying Rs.15.16 crore to Deposit Insurance and Credit Guarantee Corporation (DICGC).
Allowing a writ petition filed by the DICGC seeking arrears of Rs.22.96 crore from the liquidator, the Bench said the bank was established around 100 years ago as an institution of cooperative micro-financing and it flourished until 2001.
“However, as had happened in the case of every co-operative institution (except perhaps the milk co-operatives), this institution was also plundered both by the elected office-bearers and staff. Therefore, after 2001, the bank started committing default in making payment to its depositors most of whom were retired pensioners and poor peasants,” the judges said.
The Reserve Bank of India cancelled the bank’s licence on August 29, 2003, and restrained it from carrying on banking business. Thereafter, the Joint Registrar of Cooperative Societies–Madurai Region ordered liquidation of the bank on January 7, 2005.
Since the bank was insured under the provisions of the DICGC Act 1961, the liquidator made an application to the DICGC for sanctioning the maximum guaranteed amount of Rs.1 lakh each to the depositors and, the corporation released Rs.25.04 crore.
Subsequently, many depositors began filing cases in the High Court seeking a direction to the liquidator to return their deposits in full.
When those cases came up before a Division Bench, including Mr. Justice Ramasubramanian, on June 23, 2009, he obtained from the liquidator the details of the debtors who had been evading repayment of bank loans after the institution got liquidated.
It was found that 147 mortgage loans, 187 self-employment scheme loans, 18 housing loans and 35 hire purchase loans had to be recovered. The principal amount outstanding in respect of the self-employment scheme loans alone was Rs.11.18 crore.
The court ordered recovery of the amount through newspaper publications and suggested that the debtors must be first allowed to repay whatever amount they could. Accordingly, the liquidator collected over Rs.27 crore and paid Rs.2.75 crore to the DICGC.
However, the DICGC had filed the present writ petition seeking the arrears of Rs.22.96 crore out of Rs.25.04 crore available with the liquidator. However, the court ordered apportioning of the payments.
Pointing out that the bank’s due to individual depositors was only Rs.9.18 crore, the Bench said the money recovered from borrowers in the future should be used first to pay the balance of Rs.7.13 crore to the DICGC and then to institutional depositors.