1. The unsuccessful plaintiff is the appellant. The plaintiff, Syndicate Bank, is a nationalised bank ; it instituted the suit on June 2, 1987, for recovery of money from defendants Nos. 1 to 13. The first defendant is a co-operative society registered under the Karnataka Co-operative Societies Act, 1959. Defendant No. 4 was the president of the society. The president and members of the managing committee, in pursuance of a resolution dated June 6, 1979, borrowed a sum of Rs. 1,58,000 at 10.5 per cent. interest per annum to be repaid in five equal annual instalments commencing from May 30, 1980. They jointly executed a promissory note on June 8, 1979. Defendants Nos. 2 and 3 are the secretary and chairman of the society, respectively. Defendants Nos. 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 has been disbursed, from time to time, to defendants Nos. 4 to 13, i.e., members. On June 8, 1979, they also executed personal guarantee bonds in favour of the plaintiff. The properties in plaint 'A' and 'B' schedules are those given as security to the plaintiff for due discharge of the loan amounts taken. The defendants, while admitting the loan transaction, contended that the 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 held that the suit was not maintainable ; accordingly, it was dismissed.
2. Mr. Ashwathram, learned counsel for the 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 the proper court or it could have been rejected under Order 7, Rule 11(d), Civil Procedure Code.
3. 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.
4. We are mainly concerned with the Karnataka Co-operative Societies Act, 1959 (Act 11 of 1959) (hereinafter called 'the KCS Act'), which came into force on June 1, 1960, and the Karnataka Agricultural Credi't Operations and Miscellaneous Provisions Act, 1974 (Act 2 of 1975) (hereinafter called 'the Credit Operations Act'), which came into force on July 17, 1975. By Section 17 (Chapter 4) of the Credit Operations Act, certain provisions of the KCS Act were amended by inserting a couple of new provisions. Therefore, the provisions of the KCS Act, 1959, have to be read with these insertions. The relevant provisions are :
'KCS 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 ;
m(ii) the State Bank of India constituted under the State Bank of India Act, 1955 ;
(iii) a 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 :
'(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, the plaintiff, Syndicate Bank, is the 'credit agency'.
5. Section 70(1) of the KCS 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'
6. Sub-section (2) of this section enumerates claims which are 'deemed' to be disputes touching on the constitution, management and business of co-operative societies. On the admitted facts, the claim of the credit agency against the society being a 'dispute', it is not necessary to consider ' whether the deeming provision is attracted or not. The provisions of Section 71B of the KCS Act, which are an insertion by the 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 references 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.'
7. Sub-section (2) makes it clear that the decree or award obtained by the credit agency enables the credit agency to proceed to recover the money firstly from the assets of the society and, secondly, from its members, to the extent of their debts to the society.
8. Chapter 3 of the Credit Operations Act, 1975 (Act 2 of 1975), provides the procedure for recovery of dues by the credit agency. Rule 3 of the Karnataka Agricultural Credit Operations and Miscellaneous Provisions Rules, 1975, provides for the procedure for distraint and sale of movables. Therefore, an overall reading of both the Acts and Rules makes it manifest that a credit agency is not required to institute a suit and enter into a 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 (Act 2 of 1975) is to facilitate flow of credit for agriculturalproduction and development and for matters connected therewith. The loan in this case is obtained for digging bore-wells, 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 the Act and the Rules. By this procedure, payment of court fee which will be an additional burden can be avoided. Therefore, remedy by way of a civil suit is unavailable to a credit agency.
9. Apart from the prohibition contained in the latter part of Clause (d) of Section 70, KCS 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.
10. Mr. Aswathram, however, contended that the suit having been based on acknowledgment dated April 3, 1984, is maintainable. As mentioned earlier, the loan is obtained on June 8, 1979 ; the last instalment was due on May 30, 1984. This acknowledgment is obtained one month before the due date of the last instalment. Suit is filed on June 2, 1987. The dispute under Section 70 of the KCS Act, 1959, has to be referred within six years from the date of accrual of the cause of action. The 'cause of action' is non-payment of instalments to discharge the loan based on the pronote. The acknowledgment extends the period of limitation only in respect of suits. By Section 119, KCS Act, 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.
11. 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 credit agency to obtain an award under the KCS 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 the 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 a dispute between the credit agency and society or its members coming under Clause (d) of Section 70(1) of the KCS Act, it cannot be done so.
12. After considering the matter in all its aspects, we do not find any good ground to admit this appeal.
13. Mr, Aswathrarn's contention that the plaint should have been returned for presentation to the proper court does not appeal to us. The finding is regarding maintainability of the suit In a civil court and not one of jurisdiction of court to entertain the suit. However, we accept Mr. Aswathrarn's contention that the case comes under Clause (d) of Rule 11 of Order VII of the Civil Procedure Code and direct that the dismissalof the suit by the court below be treated as rejection of the plaint.
14. Subject to the above direction, this appeal fails and is dismissedwithout Being admitted.