Supreme Court Rules on Revival and Financial Settlement of Super Bazar Cooperative

The case of M/s Writers and Publisher Pvt Ltd vs. A.K. Mishra, Official Liquidator of The Cooperative Stores Ltd. Super Bazar revolves around the financial settlement and revival of Super Bazar, a multi-state cooperative society. The Supreme Court was tasked with ensuring that the financial transactions between the bidders, the government, and the employees were settled in accordance with previous court rulings.

Background of the Case

The revival of Super Bazar had been under the Supreme Court’s supervision for several years. By an order dated May 7, 2008, the Court identified three bidders, including M/s Writers and Publisher Pvt Ltd (WPL). The workers’ unions agreed that the total outstanding dues of workers as of December 31, 2007, amounted to Rs. 54.31 crores. On February 26, 2009, the Court accepted the Evaluation Committee’s recommendation to approve WPL’s bid, directing the Official Liquidator (OL) and the Central Registrar, Multi-State Cooperative Societies to take steps for the revival of Super Bazar.

However, by September 2015, an affidavit filed by the Union of India stated that neither WPL nor the management of Super Bazar had submitted a revival plan, leading to legal complications. Eventually, the Court ruled on March 29, 2016, that WPL would be released from the arrangement and refunded its entire investment with 6% interest per annum, subject to deduction of profits made during its operational period.

Arguments by the Petitioner (Writers and Publisher Pvt Ltd)

The petitioner, WPL, argued that:

• The entire investment, including share capital, should be refunded: The Court’s order on March 29, 2016, explicitly stated that WPL’s investment should be returned with 6% interest.
• Losses incurred should not be deducted: The losses were due to mandatory payments made to employees as per earlier court directives, not due to business failures.
• CAG’s interpretation of ‘investment’ was incorrect: The share capital invested by WPL should be treated as part of the overall investment and eligible for interest.

Arguments by the Respondent (Official Liquidator)

The Official Liquidator defended the position that:

• Share capital should not be included in refundable investment: Typically, shareholders do not receive interest on their investments in cooperative societies.
• Losses should be deducted before refund: The losses incurred by Super Bazar must be accounted for before finalizing the amount payable to WPL.
• The audit was conducted in accordance with the Supreme Court’s directions: The Comptroller and Auditor General of India (CAG) had reviewed all financial records to ensure fairness.

Supreme Court’s Observations

The Supreme Court, led by Chief Justice Dipak Misra, Justice A.M. Khanwilkar, and Justice Dr. D.Y. Chandrachud, carefully examined the financial transactions and previous court rulings. The Court made the following key observations:

1. Interest on Entire Investment

The Court ruled that WPL was entitled to interest on its entire investment, including share capital, stating:

“WPL should be refunded the entire investment made by them along with interest at the rate of 6 per cent per annum… subject to deduction of profits made during the period when the arrangement subsisted.”

This meant that the amount invested as share capital should not be treated differently from other investments.

2. Deduction of Losses

The Court found that CAG’s report incorrectly deducted losses from WPL’s refund. The losses incurred were due to:

• Rs. 54.31 crores paid to workers as past dues.
• Rs. 31 crores paid as salaries for three years.
• Rs. 15 crores paid for outstanding property taxes and other liabilities.

The Court ruled that these payments were mandatory expenses and should not be treated as business losses.

Final Judgment

The Supreme Court ruled:

• WPL is entitled to a refund of its entire investment, including share capital, with 6% interest per annum.
• Profits earned during WPL’s management period would be deducted.
• Losses should not be deducted.
• The Official Liquidator must process the refund as per this ruling.

The Court dismissed the contempt petition against the Official Liquidator but directed all parties to comply with its observations.

Impact of the Judgment

This ruling has several significant implications:

• Clarifies Financial Responsibilities: The judgment ensures fair treatment of bidders in cooperative society revivals.
• Protects Investors: By allowing interest on share capital, the ruling encourages investment in cooperative ventures.
• Strengthens Legal Oversight: The Court’s intervention ensures that revival plans are executed transparently.

With this ruling, the Supreme Court reinforced the principles of fair financial settlements and upheld the rights of all stakeholders in cooperative society revivals.

Petitioner Name: M/s Writers and Publisher Pvt Ltd.
Respondent Name: A.K. Mishra, Official Liquidator, The Cooperative Stores Ltd. Super Bazar.
Judgment By: Justice Dipak Misra, Justice A.M. Khanwilkar, Justice Dr. D.Y. Chandrachud.
Place Of Incident: India (Cooperative Society Dispute).
Judgment Date: 17-05-2018.

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