Jurisdiction of Cooperative Court: Under Section 91(1)(d) of the MCSA, a dispute against sureties and nominal members of a cooperative society is maintainable before the Cooperative Court. (Paras 13, 14, 15, 16)

Limitation Period: The limitation period for disputes under Section 92(1) of the MCSA is six years from the date of the act or omission, and not the three-year period under the Limitation Act. (Paras 19, 20, 22)

Guarantor Liability: The liability of guarantors is co-extensive with that of the principal debtor, and a change in loan terms without the guarantor’s consent does not discharge their liability unless it amounts to a material alteration of the contract. (Paras 9, 10, 18)

The High Court dismissed the writ petitions, holding that:

The dispute was maintainable under Section 91(1)(d) of the MCSA as the petitioners were sureties and nominal members of the society. The limitation period under Section 92(1) of the MCSA applied, and the dispute was not time-barred. The petitioners were liable for the loan amount as guarantors, and the change in loan terms did not discharge their liability.

Major Acts:

1. Maharashtra Cooperative Societies Act, 1960 (MCSA) – Sections 91, 92(1), 92(2), 73

2. Limitation Act, 1963 – Sections 14, 36, 37

3. Code of Civil Procedure, 1908 (CPC) – Order 41 Rule 31

Subjects:
Guarantor liability – Limitation period – Cooperative Court jurisdiction – Amendment application – Nominal members – Surety bonds – Debt Recovery Tribunal – Summary proceedings

Facts:

1. Nature of the Litigation: The petitioners, who were guarantors for a loan advanced to a cooperative society, challenged the judgment of the Cooperative Appellate Court, which held them jointly and severally liable for the loan amount. The petitioners contended that the dispute was barred by limitation and that the Cooperative Court had no jurisdiction over them.

2. Who is asking the court and for what remedy? The petitioners sought to quash the Cooperative Court’s order, arguing that the dispute was time-barred and that they were not liable as guarantors due to a change in the loan terms without their consent.

3. Reason for filing the case: The petitioners were aggrieved by the Cooperative Court’s decision to allow an amendment application adding them as parties to the dispute, which they claimed was filed beyond the limitation period.

4. What has already been decided until now? The Cooperative Court and the Appellate Court had both ruled against the petitioners, holding that the dispute was maintainable under Section 91 of the MCSA and that the limitation period under Section 92(1) applied.

Issues:

1. Whether the dispute against the petitioners was maintainable under Section 91 of the MCSA?

2. Whether the relief sought against the petitioners was barred by limitation under Section 92(1) of the MCSA?

3. Whether the petitioners, as guarantors, were liable for the loan amount despite the change in loan terms from a term loan to a cash credit facility?

Submissions/Arguments:

• Petitioners:
  a. The dispute was barred by limitation as the petitioners were added as parties in 2012, beyond the three-year limitation period under the Limitation Act.
  b. The Cooperative Court had no jurisdiction over the petitioners as they were not members of the society.
  c. The loan terms were altered without their consent, which discharged their liability as guarantors.
  d. The appellate court failed to frame specific points as required under Order 41 Rule 31 of the CPC.

• Respondents:
  a. The dispute was maintainable under Section 91(1)(d) of the MCSA as the petitioners were sureties and nominal members of the society.
  b. The limitation period under Section 92(1) of the MCSA applied, which provided a six-year limitation period from the date of the act or omission.
  c. The petitioners had executed guarantee bonds, and their liability was co-extensive with that of the society.