Co.op bank got insolvent
Querist :
Anonymous
(Querist) 08 September 2011
This query is : Resolved
bank at indore namely gujrat mercantile credit co.op got insolvent
just before the day of insolvency i had prepared demand drafts worth 4 lac by cash
which got bounsed and resulted in heavy loss no body is hearing ? some says that now it is time barred , i cant understand what to do ? help me ?
Devajyoti Barman
(Expert) 08 September 2011
Since it has gone into liquidation and you are an unsecured creditor, you have to wait for distribution of properties by the Official Liquidator who after satisfying the debts of secured creditor would turn to unsecured ones like you.
So it seems to be along journey.
R.Ramachandran
(Expert) 08 September 2011
You have to prefer your claim before the Official Liquidator and be in the queue.
Raj Kumar Makkad
(Expert) 08 September 2011
I do agree with both experts and add that official liquidator shall be appointed by High Court so be in close contact of each such happening pertaining to this bank there.
M/s. Y-not legal services
(Expert) 09 September 2011
Something not clear with your query. Thats how a demand draft can be bounced as insufficient? Just clear it.. And you not stated anything about time period. Then how can we talk about limitation.
prabhakar singh
(Expert) 09 September 2011
Mr. TOM!
As the Bank became BANKRUPT before the draft
presented for cash ,hence it is now a liquidation process on which other experts have rightly spoken.As party is layman the delay in presentation for cash by him is being named as time barred .
M/s. Y-not legal services
(Expert) 09 September 2011
Ok sir. I don't know this issue.. Same time insolvency principle didn't lie for negotiable instruments act know?
R.Ramachandran
(Expert) 09 September 2011
Dear Mr. Tom,
Please understand the fact situation.
I go to a bank X. I give cash for Rs. 1 lakh and obtain a demand draft in your favour for Rs. 1 lakh from the said bank.
I hand over the DD to you. Naturally you will deposit the DD in your bank Y for realising the amount.
The Bank "Y" will have to get the amount from Bank "X" through clearance mechanism.
In the meanwhile Bank "X" which issued the DD (after receiving the cash) goes into liquidation. That means, your bank "Y" will not be in a position to get money against the DD. Consequently, your bank will intimate you about the bank X having been under liquidation and the amount against DD being not realised. If the bank had given credit entry into your account in anticipation of the DD realisation will reverse the entry in your account.
You will write back to me saying that the DD given by me has not been honoured and asking for money. While i am bound to pay the money contained in the DD to you, am I not eligible to get the cash back from the bank from which I obtained the DD.
When I go to bank X to get back the cash which I paid for getting the DD, I find that the bank is under liquidation. Therefore, being an unsecured creditor, my chances of realising the money is quite bleak. I have to stand in the que before the official liquidator.
THUS, EVEN IN RESPECT OF NEGOTIABLE INSTRUMENTS, IF THE BANK ITSELF GOES INTO LIQUIDATION, THE INSOLVENCY PRINCIPLE WILL APPLY.
pawan sharma
(Expert) 09 September 2011
i will go with Mr. Barman
Guest
(Expert) 09 September 2011
I endorse the views of S/Shri Devajyoti Barman and Ramachandran.
About currency (time-barred) of the bank draft, it would have expired only for the drawee after 6 months of the issue, but not for the person entitled to get refund of the his money on account of default of the bank due to insolvency of bank.
So, you may have to keep watch on when and who is appointed as the official liquidator for the bank and when he asks for the claims. Date for filing claims is fixed. No claim is normally accepted after the due date.
Isaac Gabriel
(Expert) 09 September 2011
I totally differ with the views.While issuing the demand draft, the draft issuing bank ought to have sent advise to the drawee bank simulatneously to honour the draft on peresentation at counter.The drawee bank too needn't sent it on collection The transaction itself is closed on the day of issue of the draft. Therefore, the question of dishonour dosn't arise eventhough the issuing bank goes on liquidation the next day.So, there is an error in the question and the anonymous to expalin in detail.
prabhakar singh
(Expert) 09 September 2011
yes Expert Isaac Gabriel raises a sound question we have overlooked that it was a draft drawn by one bank branch on the other bank branch and it would be payable by the branch on which it is drawn,so unless the branch by whom the draft is payable stands bankrupt,no matter issuing branch may go bankrupt ,the liability to pay the draft is on which it is drawn,so being the case a FORA
Complaint can be considered.
But Mr.Isaac Gabriel, normally,the drafts are drawn by same bank on its own bank branch,but it was a co-operative bank
and author has not clarified by which bank it was enjoying draft facility service.
R.Ramachandran
(Expert) 09 September 2011
I am afraid, Mr. Gabriel is not correct.
Let me go step by step.
I have an account with the Bank X.
I deposit cash into my bank account with Bank X.
The bank goes into insolvency. What is my fate? I being an unsecured creditor, has to stand in queue before the Official Liquidator.
Similarly, I pay cash to the bank and obtain DD.
The DD is in favour Mr. ABC.
After obtaining such a DD, if the issuing bank goes into insolvency - what is the position. ABC will not accept the DD. Even I cannot go bank to the bank from which I took the DD and ask for the cash deposited by me.
Being an unsecured creditor I have to stand in the queue before the Official Liquidator.
Isaac Gabriel
(Expert) 09 September 2011
Dear Expert Ramachandran,While issuing the draft,the duplicate copy is the advise to the drawee bank to honour it on presentation.The drawee bank need not sent it for collection since it has received the value at its command.There ends the matter.The transaction thereafter is between the drawee bank and the holder of the instrument.Even if the bank goes on liquidation the next minute,it has no bearing on the draft since the advise are sent by electronic means nowadays.No matter whether it was on a nationalised bank or coop.bank or a private party.The anonymous is keeping silent to proceed further.
R.Ramachandran
(Expert) 09 September 2011
Dear Mr. Gabriel,
The Drawer and Drawee bank will always be the same as far as DD is concerned (unless by 'drawee bank' you refer to the banker of the beneficiary of the DD).
In any case, when the DD reaches the person in whose favour it has been drawn, he has to present it before his own bank either in the counter or in the Account. The bank concerned would have already got information about the "insolvancy" of the issuing bank. It will not honour the DD. If it honours, then the bank concerned has to stand in que before the Official Liquidator!
Querist :
Anonymous
(Querist) 12 September 2011
mr. R ramachandran had explained very well my problem he stated exact position i had read your views i just want to know now what action i must take secondly how i will came to know about who is official liquidator and does my dd got time barred as already bank had colapsed 13 yrs ago and no action had been taken yet.
prabhakar singh
(Expert) 12 September 2011
only 3 years were more while you say 13 years
no hope that your money still survives for recovery in any of the case even liquidation might have gone finished.
Querist :
Anonymous
(Querist) 12 September 2011
bank name was GUJRAT MERCANTILE CO.OP BANK LTD INDORE SITUATED AT Y.N. ROAD INDORE ITS DIRECTORS ARE JANAK GANDHI AND O.T. GANDHI
Guest
(Expert) 12 September 2011
I agree with the contention of Shri Ramachandran. No bank, other than the RBI, can draw DD directly on some other bank, except to its own branch. So, the cooperative bank would have sent advice only to its own branch at another station, as against the contention of Mr. Isaac Gabriel. The only thing is that the drawee of the DD can get credit through his own bank after his own bank would get credit from the concerned drawee branch of the cooperative bank.
Querist :
Anonymous
(Querist) 12 September 2011
liquidation had not taken place yet property of bank are there
R.Ramachandran
(Expert) 12 September 2011
If actual liquidation had not taken place so far, then approach the Official Liquidator and file your claim also and take acknowledgement.
