It could be a major jolt for cooperative banks in the country. The Bombay high court has ordered that the recovery certificates issued by the joint registrar of cooperative societies under section 101 of the Maharashtra Co-operative Societies Act cannot be considered as a decree of a civil court and hence cannot be executed through a court.

The judgment was passed in a case filed by Greater Mumbai Cooperative Bank against Satguru Construction Company and its director Gopal Khetan and Vijay Khetan. Early this year, the high court had issued arrest warrant against the directors for non-payment of dues to the tune of Rs 80 lakh (Rs 8 million). Satguru Construction had challenged the issue of the warrant.

The high court held that "as per the provisions of the Maharashtra Co-operative Societies Act 1960 , no civil or revenue court shall have any jurisdiction in respect of any dispute required to be refereed to the cooperative court for decision and all orders, decisions or awards passed in accordance with the said act or the rules made thereunder shall be final and not liable to be challenged or set aside or modified or revised or declared void by any court upon the merits or upon any ground whatsoever.''

The high court has also declared the arrest warrant issued against the directors of the construction company as null and void.

The court said recoveries based on the recovery certificate issued by the registrar of cooperatives can be executed under the Maharashtra Land Revenue Code and the dues recovered as arrears of land revenue as prescribed under the code.

The judgement has come as a shock to the bank as it has wider ramifications or greater delays in making recoveries by cooperative banks. Greater Mumbai Cooperative Bank's law firm, Goenka Law Associates, are now in the process of challenging the high court's judgment in the supreme court.