Bombay High Court
Sadashiv S/O Ganpatrao Mahajan vs The Hon'Ble Minister For on 16 August, 2012
Author: R.K. Deshpande
Bench: R.K. Deshpande
1
wp956.11.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
Writ Petition No.956 of 2011
Sadashiv s/o Ganpatrao Mahajan,
Aged about 54 years,
Occupation - Agriculturist,
Resident of Waradh,
Tahsil Ralegaon, Distt. Yavatmal. ... Petitioner
Versus
1. The Hon'ble Minister for
Cooperation and Textile,
State of Maharashtra,
Mantralaya,
Mumbai-32.
2. The Divisional Joint Registrar,
Cooperative Societies,
Amravati Division,
Sahkar Sankul, Kanta Nagar,
Camp - Amravati.
3. Yavatmal District Central
Cooperative Bank Limited,
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2
wp956.11.odt
through its Manager,
Yavatmal.
4. Prafulla s/o Khushalrao Mankar,
Aged about 45 years,
Occupation - Agriculturist,
R/o Bajoriya Nagar,
Near Sai Mandir,
Yavatmal,
Tah. and Distt. Yavatmal. ... Respondents
Shri S. Paliwal, Advocate for Petitioner.
Smt. B.P. Maldhure, AGP for Respondent Nos.1 and 2.
Shri P.C. Madkholkar, Advocate for Respondent No.3.
Shri A.M. Ghare, Advocate for Respondent No.4.
Coram : R.K. Deshpande, J.
Date of Reserving the Judgment : 2-8-2012 Date of Pronouncing the Judgment : 16-8-2012 Judgment :
1. Rule, made returnable forthwith. Heard finally by consent of the learned counsels appearing for the parties.
2. The dispute in this petition relates to the disqualification ::: Downloaded on - 09/06/2013 19:00:10 ::: 3 wp956.11.odt of the respondent No.4 Prafulla s/o Khushalrao Mankar, as the Director of the respondent No.3 Yavatmal District Central Co-operative Bank Limited, Yavatmal (for short, "the said Bank") under clause (ii) of Section 73EA of the Maharashtra Co-
operative Societies Act, 1960 (for short, "the said Act") on the ground that he is an office bearer of the defaulted Primary Agricultural Credit Co-operative Society, viz. Saoner Gramin Vividh Karyakari Sahakari Sanstha Maryadit, Ralegaon, District Yavatmal (for short, "the said Society").
3. In exercise of the power under sub-section (1) of Section 78 of the said Act, the respondent No.2 Divisional Joint Registrar, Co-operative Societies, Amravati Division, Amravati, passed an order on 12-5-2010 removing the respondent No.4 as Director of the said Bank on the ground that he has incurred ::: Downloaded on - 09/06/2013 19:00:10 ::: 4 wp956.11.odt disqualification under clause (ii) of Section 73EA of the said Act.
This order has been set aside by the Hon'ble Minister of Co-operation, Maharashtra State, Mumbai, on 29-9-2010 in Appeal No.341 of 2010 decided in exercise of his statutory power of an appeal under Section 152 of the said Act.
4. The petitioner, who claims to be the member of Adiwasi Seva Sahakari Sanstha Ltd., Wadhona, Tahsil Ralegaon, District Yavatmal, a member-Society of the said Bank, has filed this petition challenging the order passed by the Hon'ble Minister of Co-operation, Maharashtra State, Mumbai. The locus of the petitioner to file this petition was questioned before this Court, and the learned Single Judge, by judgment dated 15-9-2011, dismissed Writ Petition No.2149 of 2011 upholding the objection.
This was the subject-matter of challenge in Letters Patent Appeal ::: Downloaded on - 09/06/2013 19:00:10 ::: 5 wp956.11.odt No.450 of 2011, which was allowed by the Division Bench of this Court, holding that the petitioner has locus to file the instant petition. The judgment of the Division Bench of this Court was carried to the Apex Court in Petition for Special Leave to Appeal (Civil) No.16543-16550 of 2012, which was dismissed by the order dated 3-7-2012, which reads as under :
"We have heard learned counsel for the petitioners and perused the relevant material.
We do not find any valid and legal ground for interference with the impugned order of the High Court. The special leave petitions are dismissed."
As a result, the locus of the petitioner to maintain this petition is finally established.
5. The facts in detail are as under :
::: Downloaded on - 09/06/2013 19:00:10 ::: 6wp956.11.odt The respondent No.3 Yavatmal District Central Co-operative Bank Limited is a specified Society and governed by the provisions of the said Act and the Rules framed thereunder. The Board of Directors of the said Bank consists of total 28 Directors, of which 14 Directors are the representatives of different Primary Agricultural Credit Co-operative Societies.
In the month of September/October, 2007, the election programme was declared to elect the Board of Directors of the said Bank. The date of submission of the nomination paper was 3-10-2007, the date of publication of the list of validly nominated candidates was 20-10-2007, the date of polling was 1-11-2007, and the results were declared on 4-11-2007. The respondent No.4 Prafulla s/o Khushalrao Mankar contested the election of the Board of Directors as a representative of one Saoner Gram ::: Downloaded on - 09/06/2013 19:00:10 ::: 7 wp956.11.odt Vividh Karyakari Sahakari Sanstha Maryadit, Ralegaon, District Yavatmal, which is a member-Society of the said Bank, and was elected. Since then, he was functioning as such.
6. An amendment was made to the said Act with effect from 29-10-2007, introducing Section 73EA therein by the Maharashtra Co-operative Societies (Second Amendment) Ordinance, 2007, providing for the disqualification for being Director of the District Central Co-operative Bank. As per clause (ii) under this provision, no person is held eligible for being appointed, nominated, co-opted or, for being a Director of a District Central Co-operative Bank or of the State Co-operative Bank, if he is a representative of a defaulting Primary Agricultural Co-operative Credit Society. Subsequently, by the Maharashtra Act No.XI of 2008, the word 'representative' in the ::: Downloaded on - 09/06/2013 19:00:10 ::: 8 wp956.11.odt ordinance was replaced by the word 'office bearer' in clause (ii) of Section 73EA of the said Act with effect from 29-10-2007.
7. After coming into force of this amendment, an inspection was made by the National Bank for Agriculture and Rural Development ("NABARD") between 18-11-2009 and 7-12-2009 for the position as on 31-3-2009. Accordingly, an inspection report dated 15-1-2010 was submitted to the respondent No.2 Divisional Joint Registrar, Co-operative Societies, Amravati Division, Amravati, and also to the District Deputy Registrar, Co-operative Societies, Yavatmal. The District Deputy Registrar made the inspection and submitted his report to the respondent No.2 Divisional Joint Registrar on 18-2-2010 regarding the position as on 31-1-2010.
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8. It was found in the above reports that Saoner Gram Vividh Karyakari Sahakari Sanstha Maryadit, a Primary Agricultural Credit Co-operative Society, of which the respondent No.4 Prafulla s/o Khushalrao Mankar was the Director, is a defaulting Society, and hence a show cause notice under sub-section (1) of Section 78 of the said Act was issued on 26-2-2010 by the Divisional Registrar, Co-operative Societies, Amravati, to the respondent No.4 as to why he should not be disqualified for being continued as the Director of the said Bank.
The respondent No.4 submitted his reply dated 6-4-2010 to the said show cause notice, raising various grounds.
9. After hearing the parties, the respondent No.2 Divisional Joint Registrar, Co-operative Societies, Amravati Division, Amravati, passed an order on 12-5-2010, holding that the loan of ::: Downloaded on - 09/06/2013 19:00:10 ::: 10 wp956.11.odt Rs.34.10 lacs was outstanding against Saoner Gram Vividh Karyakari Sahakari Sanstha Maryadit on 30-9-2009, and the respondent no.4 being the office bearer of the said Society was disqualified for being continued as the Director of the said Bank under clause (ii) of Section 73EA of the said Act. Hence, an order removing the respondent No.4 as a Director of the said Bank was passed under sub-section (1) of Section 78 of the said Act.
10. In statutory appeal under Section 152 of the said Act, the Hon'ble Minister of Co-operation, Maharashtra State, Mumbai, has passed an order on 29-09-2010 setting aside the order passed by the respondent No.2 Divisional Joint Registrar, Co-operative Societies, Amravati Division, Amravati, on 12-5-2010, disqualifying the respondent No.4 as the Director of the said ::: Downloaded on - 09/06/2013 19:00:10 ::: 11 wp956.11.odt Bank. It was held (i) that there was no effective consultation with the Federal Society and no consultation with the Reserve Bank of India, as required under the Second Proviso to clause (b) of sub-section (1) of Section 78 of the said Act; (ii) that on 31-3-2010, the entire loan amount was paid by the said Society of which the respondent No.4 was the Director; (iii) that the respondent No.4 was not the office bearer of the said Society, but was a member of the Managing Committee of the said Society;
and (iv) that the respondent No.4 was validly nominated as a candidate for the post of Director of the said Bank on 20-10-2007, i.e. prior to coming into force of the provisions of Section 73EA of the said Act with effect from 29-10-2007 and that the amendment was not retrospective in operation.
11. Shri Paliwal, the learned counsel appearing for the ::: Downloaded on - 09/06/2013 19:00:10 ::: 12 wp956.11.odt petitioner, has referred to the provision of Section 2(20) of the said Act to urge that the respondent No.4 is a Member of the Managing Committee or the Director of the said Society and hence can be termed as an 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act. He has referred to the definitions of an 'office bearer' in P. Ramanatha Aiyar's Advanced Law Lexicon, which are reproduced below :
" "Office Bearer" means a Panch, Sarpanch or Upsarpanch of a gram panchayat, a member, a President or Vice President of a Janpad Panchayat or a member, or President or Vice President of Zila Panchayat as the case may be."
" "Office Bearer" means an individual elected by the general body or the board of the Co-operative society to any office of such Co-operative society in accordance with its bye-laws."
He has also placed reliance upon the two decisions of this Court in the cases of (i) Chandrakant Vishwanath Sawarkar and others ::: Downloaded on - 09/06/2013 19:00:10 ::: 13 wp956.11.odt v. District Deputy Registrar, Co-operative Societies, Nagpur and others, reported in 1978 Mh.L.J. 526; and (ii) Babasaheb Devidasrao Borade v. Additional Divisional Commissioner and ors., reported in 2011 (6) Bom. C.R. 63.
12. Relying upon the three decisions in the cases of
(i) Pundalik Kadhav v. District Deputy Registrar, Co-operative Societies, Chandrapur and others, reported in 1990 Mh.L.J. 925 (Para 13); (ii) Pundalik v. District Deputy Registrar, Co-operative Societies, Chandrapur and others, reported in (1991) 2 SCC 423; and (iii) Ishwar Nagar Cooperative Housing Building Society v. Parma Nand Sharma and others, reported in (2010) 14 SCC 230 (Paras 30 and 31), Shri Paliwal for the petitioner has urged that there was a default in payment of loan found on 30-9-2009 and even on 18-2-2010 and the payment of ::: Downloaded on - 09/06/2013 19:00:10 ::: 14 wp956.11.odt loan on 31-3-2010 did not wipe out the disqualification, which has already been incurred. It is urged that the statement of having resigned as a Director on 3-7-2009 from the said Society is an afterthought. It is further urged that the default in payment of installments continued and subsisted even on the date of nomination, election, appointment and thereafter also. The case was, therefore, covered by clause (ii) of Section 73EA of the said Act.
13. In respect of the requirement of consultation, it is urged by Shri Paliwal for the petitioner that the record produced indicated that a copy of the show cause notice was forwarded to the Federal Society, i.e. the Maharashtra State Co-operative Bank Limited, along with the reply to the show cause notice and all the relevant documents and the response of the Federal ::: Downloaded on - 09/06/2013 19:00:10 ::: 15 wp956.11.odt Society was also received stating that it is open for the Competent Authority to take a suitable action as it deems fit in the matter. In view of this, according to him, there was an effective consultation with the Federal Society, as contemplated by sub-section (1) of Section 78 of the said Act, and the Hon'ble Minister has committed an error in holding that there was no effective consultation. So far as the requirement of consultation with the Reserve Bank of India under clause (b) of sub-section (1) of Section 78 of the said Act is concerned, it is urged by the learned counsel for the petitioner that the said provision is not at all attracted in the present case, for the reason that it was not a case of supersession or removal of the Managing Committee, as contemplated therein.
14. Shri Ghare, the learned counsel appearing for the ::: Downloaded on - 09/06/2013 19:00:10 ::: 16 wp956.11.odt respondent No.4; and Shri Madkholkar, the learned counsel appearing for the respondent No.3-Bank, have urged that a Member of the Managing Committee or the Director of the said Society cannot be termed as an 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act. The reliance is placed upon the provision sub-section (1) of Section 73-1D of the said Act to urge that the 'office bearer' would mean only the President, Vice-President, Chairman, Vice-Chairman, Secretary, Treasurer or any other officer by whatever designation called holding the office by virtue of his election. Further inviting my attention to Section 144Y read with sub-section (20) of Section 2 of the said Act and Rule 56A-35 of the Rules framed thereunder, they have urged that an officer of the Bank is different from an office bearer and the officers elect the office bearers. According to them, the respondent No.4 is not the President, Vice President, ::: Downloaded on - 09/06/2013 19:00:10 ::: 17 wp956.11.odt Chairman, Vice Chairman, Treasurer or any other officer, as defined under sub-section (1) of Section 73-ID(1) and hence the provision of clause (ii) of Section 73EA of the said Act is not applicable.
15. Shri Ghare and Shri Madkholkar have urged that the 'default' contemplated under clause (ii) of Section 73EA is one which subsisted on the date of passing of the order under sub-section (1) of Section 78 of the said Act. According to them, the provisions of Section 73EA of the said Act were introduced with effect from 29-10-2007, the date of polling was 1-11-2007, the respondent No.4 was elected as the Director on 4-1-2007, he resigned from the post of the Director of the said Society on 30-9-2009, and on 31-3-2010 all the dues were repaid. As a result of all these events, according to them, the respondent No.4 cannot ::: Downloaded on - 09/06/2013 19:00:10 ::: 18 wp956.11.odt be termed as an 'office bearer of a defaulting Society' in terms of clause (ii) of Section 73EA and cannot be disqualified under sub-section (1) of Section 78 of the said Act.
16. On the requirement of consultation with the Reserve Bank of India, as contemplated under the Second Proviso to clause (b) of sub-section (1) of Section 78 of the said Act, Shri Madkholkar and Shri Ghare have divided opinion.
Shri Madkholkar does not subscribe to the view of Shri Ghare that the requirement of consultation with the Reserve Bank of India is attracted even in case of a disqualification of an individual member. Shri Ghare has referred to the proviso added to sub-rule (2) of Rule 64 of the Maharashtra Co-operative Societies (Amendment) Rules, 2012 brought into force with effect from 30-1-2012, introducing the requirement of ::: Downloaded on - 09/06/2013 19:00:10 ::: 19 wp956.11.odt consultation with the Reserve Bank of India even in case of disqualification of a Member of the Society. He, therefore, submits that in view of this, the intention of the Legislature under clause (b) of sub-section (1) of Section 78 of the said Act to consult with the Reserve Bank of India is made clear.
17. Relying upon the decision of this Court in the case of Ravindra V. Gaikwad and others v. State of Maharashtra and others, reported in 2002(5) Mh.L.J. 464, which followed the decision of the Apex Court in the case of Kewalram v.
Maharashtra State Co-operative Society and others, reported in 1986(2) SCALE 398, it is urged that the consultation means the meeting of minds of two different bodies and it is absolutely lacking in the present case. Referring to the definition of the 'Committee' under Section 2(7) read with Section 73 of the said ::: Downloaded on - 09/06/2013 19:00:10 ::: 20 wp956.11.odt Act, the submission is that the record must disclose the consultation by the Registrar with such a Committee. According to Shri Ghare and Shri Madkholkar, the reply of the consulted body, i.e. the Federal Society, viz. the Maharashtra State Co-operative Bank Limited, was by the Managing Director of the said Society, which even does not state that the show cause notice and the reply along with the documents were placed before the Managing Committee of the Federal Society and that any such decision was taken by the Managing Committee. According to them, the opinion expressed in the communication dated 7-5-2010 was the personal opinion of the Managing Director of the Society, which cannot be said to be an effective consultation with the Federal Society.
18. Apart from supporting findings recorded by the Hon'ble ::: Downloaded on - 09/06/2013 19:00:10 ::: 21 wp956.11.odt Minister in the order impugned, it is pointed out that in response to the show cause notice under sub-section (1) of Section 78 of the said Act, the specific grounds were raised that - the show cause notice is totally vague, it does not specify what was the amount sanctioned to the said Society by way of loan, what was the contract or agreement of loan, when the said amount of loan became due, whether there was any demand for payment of the said amount of outstanding loan, and all such other particulars as are necessary to constitute a default, as contemplated under clause (ii) of Section 73EA, are absent. According to them, in the absence of all such material facts and particulars of the alleged defaults, the respondent No.4 was denied an opportunity to raise an effective defence violating the principles of natural justice and the spirit of sub-section (1) of Section 78 of the said Act. Hence, according to them, the action impugned is in breach of the ::: Downloaded on - 09/06/2013 19:00:11 ::: 22 wp956.11.odt principles of natural justice and in violation of the principles of providing opportunity to raise an effective defence underlying in sub-section (1) of Section 78 of the said Act. The action impugned was, therefore, liable to be set aside on this sole ground.
19. The first question required to be dealt with is whether the respondent No.4 can be termed as an 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act. In fact, the matter is no longer res integra in view of the decision of the learned Single Judge of this Court in the case of Babasaheb Devidasrao Borade v. Additional Divisional Commissioner & ors., reported in 2011(6) Bom.C.R. 63. Paras 11 to 13 of the said decision are reproduced below :
::: Downloaded on - 09/06/2013 19:00:11 ::: 23wp956.11.odt "11. Section 73(EA) lays down that an office bearer of a defaulting primary agricultural co-operative credit society shall not be eligible for being appointed, nominated, co-opted or from being a Director of a District Central Co-operative Bank. The object is that a person who is invested with the management of the society and is jointly and severally responsible for all the decisions of the society should not be made eligible."
"12. The legislature vide section 73-EA(ii) has made an "office bearer" of a defaulting primary agricultural co-operative credit society ineligible/disqualified to be a member of a committee of a specified society i.e. District Central Co-operative Bank or a State Co-operative Bank."
"13. In general parlance the "office bearers" are the persons with whom the management vests. Office bearers are the persons who are involved in the decision making process and every day management of the institution. Under the Act of 1960 as per section 73, the management of every society vest in the committee and they exercise all such powers and perform such duties as are conferred or imposed by the Act, rules and by-laws.
Perusal of section 73 it is manifest that the complete management of the society vest in a committee i.e. every member of the committee. Further section 73(1-AB) makes every member of the committee jointly and severally responsible for all the decisions taken by the ::: Downloaded on - 09/06/2013 19:00:11 ::: 24 wp956.11.odt committee during its term relating to the business of the society and they are further jointly and severally made responsible for all the acts and omissions detrimental to the interest of the society.
The legislature has made an "office bearer" of a defaulting primary agricultural co-operative credit society ineligible for being a director of the specified society i.e. District Central Co-operative Bank or the State Co-operative Bank. The object and intention behind it is to exclude all the persons with whim the management of the primary agricultural co-operative credit society vests and who are jointly and severally responsible for all the acts of omissions and commissions from becoming the director of the specified society. In view of the provisions of section 73 of the Act of 1960 the management vest with the committee and all the members are jointly and severally liable for the decisions taken by the committee. So also the members of the committee are jointly and severally responsible for all the acts and omissions detrimental to the interest of the society. The term "office bearer" cannot be given a narrow connotation, but will have to be interpreted in a wider sense.
The phrase "office bearer" will embrace in its realm all the members/directors of the committee of the primary agricultural co-operative credit society."
20. I subscribe to the aforesaid view and I would like to ::: Downloaded on - 09/06/2013 19:00:11 ::: 25 wp956.11.odt elaborate and reinforce it. Hence, the provision of Section 73EA of the said Act to the extent it is relevant, is reproduced below :
"73EA. Disqualification for being director of District Central Co-operative Bank or State Co-operative Bank igWithout prejudice to the other provisions of this Act or the rules made thereunder in relation to the disqualification of being a member of a committee, no person shall be eligible for being appointed, nominated, co-opted or, for being a director of a District Central Co-operative Bank or of the State Co-operative Bank, if he,--
(i) ......
(ii) is a person who is defaulter of a primary agricultural credit co-operative society or is an office bearer of a defaulting primary agricultural co-operative credit society.
(iii) ......"
Although the provision deals with the eligibility of persons for ::: Downloaded on - 09/06/2013 19:00:11 ::: 26 wp956.11.odt being appointed, nominated, co-opted or, for being a director of a District Central Co-operative Bank or of the State Co-operative Bank, it makes all such persons, who possess the qualifications specified in clauses (i) to (iii) therein, as ineligible. The provision is couched in the negative language. The ineligibility is for being appointed, nominated or, co-opted and the disqualification is for being continued as a director of the two classes of the Banks referred to therein. This is clear from the title of the provision itself.
21. The provision of Section 73EA of the said Act was introduced on 29-10-2007 by the Maharashtra Co-operative Societies (Second Amendment) Ordinance, 2007. It was continued on 28-12-2007 by the Maharashtra Co-operative Societies (Second Amendment)(Continuance) Ordinance, 2007.
::: Downloaded on - 09/06/2013 19:00:11 ::: 27wp956.11.odt After receiving the assent of the Governor, it was published in the Maharashtra Government Gazette on 2-5-2008 and it is deemed to have come into force on 29-10-2007. The Statement of Objects and Reasons of the Maharashtra Act No.XI of 2008 is as under :
"1. The Government of India has accepted the recommendations of the "Task Force" appointed under the Chairmanship of Prof. Vaidyanathan for Revitalisation of Co-operative Credit Structure. Accordingly, the Government of Maharashtra, the Government of India and the National Bank for Agriculture and Rural Development (NABARD) have signed Memorandum of Understanding. As a result, it will now be possible for the Primary Agriculture Credit Societies, the District Central Co-operative Banks and the State Co-operative Bank to make up their losses. As per the Memorandum of Understanding, the Government of India has agreed to provide 100% Grants for recouping the losses of the Primary Agriculture Credit Societies, the District Central Co-operative Banks and the State Co-operative Bank arising out of Agricultural Credit Business. The 50% losses of Primary Agriculture Credit Societies, District ::: Downloaded on - 09/06/2013 19:00:11 ::: 28 wp956.11.odt Central Co-operative Bank arising out of Non-Agricultural Credit Business are to be borne by the Government of India. The Government of India has also agreed to provide 100% financial assistance for computerisation, human resource development technology upgradation reforms in accounting systems and development of Management Information System of Co-operative Credit Structure entitles.
2. In order to get the financial assistance from the Government of India, as mentioned above, it is now expedient on the part of Government of Maharashtra to carry out certain Amendments in the Maharashtra Co-operative Societies Act, 1960.
3. The salient features of the Amendments proposed to be carried out in the Maharashtra Co-operative Societies Act, 1960 are as under :--
(i) ...... ] ] to ] (Not being relevant are not ] reproduced)
(v) ...... ]
(vi) Appointment of professional Directors on the Board of the Directors of District Central Co-operative Banks and the State Co-operative Bank.
(vii) Supersession or removal of the Committee of the ::: Downloaded on - 09/06/2013 19:00:11 ::: 29 wp956.11.odt District Central Co-operative Bank or the State Co-operative Bank with the prior consultation with the Reserve Bank of India.
4. The amendments proposed to be carried out in the Maharashtra Co-operative Societies Act, 1960 shall definitely help in strengthening the Co-operative Credit Structure and pave the way to make the co-operative credit entities economically viable and more autonomous.
5. As both houses of the State Legislature are not in session and the Governor of Maharashtra satisfied that circumstances exist, which render it necessary for him to take immediate action further to amend the Maharashtra Co-operative Societies Act, 1960 for the purpose aforesaid, this Ordinance is promulgated."
As per the Memorandum of Understanding signed by the Government of Maharashtra, Government of India and NABARD, the Government of India has agreed to provide 100% financial grants for recouping the losses of the Primary Agricultural Co-operative Credit Societies, the District Central Co-operative Banks, and the State Co-operative Bank arising out ::: Downloaded on - 09/06/2013 19:00:11 ::: 30 wp956.11.odt of the agricultural credit business. This will facilitate such Societies and Banks to make up their losses. In order to get such financial assistance from the Government of India, it is thought expedient to introduce several provisions under the said Act, one of it being Section 73EA.
22. Thus, the object of Section 73EA is three-fold, viz. (i) to make up the losses, (ii) to get 100% financial assistance from the Government of India for recouping losses, and (iii) to appoint professional Directors on the Board of Directors of the District Central Co-operative Banks and the State Co-operative Bank, who can bear the responsibility without any conflict of interest.
Initially, in clause (ii) of Section 73EA of the said Act, the provision was for being disqualified a 'representative' of a defaulted Primary Agricultural Co-operative Credit Society.
::: Downloaded on - 09/06/2013 19:00:11 ::: 31wp956.11.odt However, in the Maharashtra Act No.XI of 2008, it was replaced by an 'office bearer' of a defaulting Society. The term 'office bearer' is neither defined under the said Act nor under the said Rules. In the light of the object and the legislative history, the term 'office bearer' in clause (ii) of Section 73EA of the said Act will have to be construed with the aid of the other provisions under the said Act and the Rules.
23. The obligation to attain the three objects of the provision is upon the member of the Committee of the Primary Agricultural Co-operative Credit Society ("the said Society" in this case), who is elected as a Director of the District Central Co-operative Bank ("the said Bank" in this case). The 'Committee' is defined under Section 2(7) of the said Act as under :
::: Downloaded on - 09/06/2013 19:00:11 ::: 32wp956.11.odt " "committee" means the committee of management or board of directors or other directing body, by whatever name called, in which the management of the affairs of a society is vested under Section 73."
The 'Committee' is the Committee of Management or Board of Directors or other directing bodies by whatever name called, in which the management of the affairs of the Society is vested under Section 73 of the said Act, but the provision does not deal with the constitution of the Committee.
24. Section 73 of the said Act deals with the constitution of the Committee, its powers and functions, and sub-section (1) thereof runs as under :
"73. Committee, its powers and functions (1) The management of every society shall vest in a committee, constituted in accordance with this ::: Downloaded on - 09/06/2013 19:00:11 ::: 33 wp956.11.odt Act, the rules and by-laws, which shall exercise such powers and perform such duties as may be conferred or imposed respectively by this Act, the rules and the by-laws."
Section 73 states that the management of every Society shall vest in a Committee constituted in accordance with the Act, the Rules and the Bye-laws. When this provision was enacted, neither the Act nor the Rules prescribed the Committee in which the management of Society shall vest and which shall exercise powers and perform such duties, conferred or imposed under the said Act, Rules and the Bye-laws. Hence, it was essential to go to the bye-laws of every Society to see the constitution of such Committee.
25. There was a change brought about this by adding sub-section (1AB) under Section 73 of the said Act by way of an ::: Downloaded on - 09/06/2013 19:00:11 ::: 34 wp956.11.odt amendment of Maharashtra Act No.XLI of 2000 with effect from 23-8-2000. Since it is also relevant, is reproduced below :
"(1AB) The members of the committee shall be jointly and severally responsible for all the decisions taken by the committee during its term relating to the business of the society. The members of the committee shall be jointly and severally responsible for all the acts and omissions detrimental to the interest of the society.
Every such member, in case of housing societies, within forty-five days of his assuming the office; and in case of other societies, within fifteen days of his assuming the office; shall execute a bond to that effect, in the form as specified by the State Government by general or special order. The member who fails to execute such bond within the specified period shall be deemed to have vacated his office as a member of the committee :
Provided that, before fixing any responsibility mentioned above, the Registrar shall inspect the records of the society and decide as to whether the losses incurred by the society are on account of acts or omissions on the part of the members of the committee or on account of any natural calamities, accident or any circumstances beyond the control of such members :
Provided further that, any member of the ::: Downloaded on - 09/06/2013 19:00:11 ::: 35 wp956.11.odt committee, who does not agree with any of the resolution or decision of the committee, may express his dissenting opinion which shall be recorded in the proceedings of the meeting and such member shall not be held responsible for the decision embodied in the said resolution or such acts or omissions committed by the committee of that society as per the said resolution. Such dissenting member, if he so desires, may also communicate in writing his dissenting note to the Registrar within seven days from the date of the said resolution or decision. Any member, who is not present for the meeting in which the business of the society is transacted, and who has not subsequently confirmed the proceedings of that meeting, such member shall also not be held responsible for any of the business transacted in that meeting of the society."
Consequently, Rule 58-A of the Rules framed under the said Act introduced on 18-2-2002 is as under :
"58-A. Bond to be executed by elected Members of Managing Committee Every elected member of the Managing ::: Downloaded on - 09/06/2013 19:00:11 ::: 36 wp956.11.odt Committee shall execute a bond in Form M-20 within fifteen days of his assuming the office. Such bond shall be executed on the stamp paper as provided under the Bombay Stamp Act, 1958. The expenditure on stamp paper shall be borne by the society. The Chief Executive Officer/Secretary of the society shall receive such bonds and keep them on record of the society and accordingly inform the Registrar within fifteen days from formation of the Committee."
Form M-20 referred to therein is as under :
"FORM M-20 (See rule 58-A) I, Shri/Smt. ......................................................................age ............................resident of ......................................................... have been elected on the Managing Committee of .............................................................. Society for the period ......................................
I have assumed office from ....................................... I declare today i.e........................................... that I shall be jointly and severally responsible for all the decisions taken by the committee during its term relating to the business of the Society and shall be jointly and severally responsible for all the acts and omissions detrimental to the interest of the Society, as provided in section 73(1AB) of the Act.::: Downloaded on - 09/06/2013 19:00:11 ::: 37
wp956.11.odt Signature of Managing Committee Members Seal of the Society Date Place :
Signature of Witness (Secretary/Chief Executive Officer)"
26. Although the question as to the constitution of the Committee and vesting of the Management of every Society in such Committee was required to be decided as per Section 73 in accordance with the provisions of the bye-laws of every such Society, in view of the addition of sub-section (1AB) to Section 73 of the said Act, such requirement no longer existed with effect from 23-8-2000. Thus, the added provision makes every member of the Committee of the Primary Agricultural ::: Downloaded on - 09/06/2013 19:00:11 ::: 38 wp956.11.odt Co-operative Credit Society ("the said Society" in this case) jointly and severally responsible for all the decisions taken by the Committee during its term relating to the business of the Society. Such member is also held liable for all the acts and omissions detrimental to the interest of the District Central Co-operative Bank or the State Co-operative Bank ("the said Bank" in this case) on which he is elected as a Director. The individual member of the Committee of the Society is exempted from such acts and omissions if he does not subscribe to the resolution or the decision of the Committee or omission to discharge liability of the Society, as contemplated by the Second Proviso to Section 73EA of the said Act.
27. Thus, in the light of the three objects of Section 73EA, the legislative history of it and the provisions of Sections 2(7), ::: Downloaded on - 09/06/2013 19:00:11 ::: 39 wp956.11.odt 73, and 73(1AB) of the said Act read with Rule 58A of the said Rules and Form M-20, it is every member of Committee of Management or every Director of the Primary Agricultural Co-operative Credit Society, who shall be the 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act irrespective of the fact that the bye-laws of such Society vest the management of Society in a shorter body consisting of President, Vice-President, Chairman, Vice-Chairman, Secretary, Treasurer or any other officer, but excluding the members of the Managing Committee or the Directors. The respondent No.4 Prafulla Khushalrao Mankar being the Director/Member of the Committee of Management of the said Society is an 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act.
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28. In view of this, the contention of the learned counsels appearing for the respondent Nos.3 and 4 that in the absence of there being a specific provision in the bye-laws of the said Society on record, including a Director or a Member of the Managing Committee of the said Society, the term 'office bearer' in clause (ii) of Section 73EA of the said Act cannot be decided, loses its significance. The replacement of the word 'representative' by the term 'office bearer' under clause (ii) intends to exclude only such representatives of the Primary Agricultural Co-operative Credit Societies, who were not the members of the Managing Committee or of the Board of Directors of such Societies and were not under any obligation to execute the bond in Form M-20.
29. Section 73-1D of the said Act deals with motion of no ::: Downloaded on - 09/06/2013 19:00:11 ::: 41 wp956.11.odt confidence against the officers of the Societies, viz. the President, Vice-President, Chairman, Vice-Chairman, Secretary, Treasurer or any other officer by whatever designation called.
The term 'officer' under Section 2(20) of the said Act includes member of Committee and any other person elected and appointed under the said Act, Rules or the Bye-laws.
Rule 56A-35 of the said Rules also deal with the election of the officer or officers of notified Society by the elected members of the Managing Committee. Neither the provision of Section 73-1D nor the provision of Rule 56A-35 relied upon by Shri Ghare, has any bearing on the question of removal of a member of the Committee under sub-section (1) of Section 78 of the said Act. None of these provisions can also assist to substantiate the argument that the elected members of the Committee of Management or the elected Director of the said ::: Downloaded on - 09/06/2013 19:00:11 ::: 42 wp956.11.odt Society cannot be called as an 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act or that the 'office bearers' are only those who are elected by the elected members of the Committee of Management or by the Directors of the said Society. On the contrary, to some extent the definition of 'officer' under Section 2(20) substantiates the view which is taken. Similarly, Section 144Y of the said Act applies only to specified Society and this case is concerned with the 'office bearer' of a defaulting Primary Agricultural Co-operative Credit Society, which is a notified Society.
30. The contention of S/Shri Ghare and Madkholkar for the respondent Nos.4 and 3 respectively is that under Section 78(1), the Registrar has power to remove any member of such Committee, who incurs a disqualification under the said Act. It ::: Downloaded on - 09/06/2013 19:00:11 ::: 43 wp956.11.odt is the further contention that it would include only such members, who are holding the posts of President, Vice-President, Chairman, Vice-Chairman, Secretary, Treasurer and not the member/Director of the Committee/Management the office bearers of the Primary Agricultural Co-operative Credit Society under clause (ii) of Section 73EA and not those who are simply members. Hence, the action of the Divisional Joint Registrar under Section 78(1) of the said Act is without any jurisdiction.
31. The argument is anomalous. Once Section 73(1AB) of the said Act makes all the members of the Committee of the Primary Agricultural Co-operative Credit Society jointly and severally liable or responsible for all the acts and omissions, then there cannot be an intention of the Legislature to exclude ::: Downloaded on - 09/06/2013 19:00:11 ::: 44 wp956.11.odt some of those, who bear the conflicting interests and responsible for the acts of omission and commission detrimental to the interest of one of the two Banks specified therein, of which they are the members of the Managing Committee. Hence, the term 'office bearer' in clause (ii) of Section 73EA will have to be read as a member of the Committee of the Primary Agricultural Co-operative Credit Society in tune with sub-section (1) of Section 78 of the said Act. It cannot be construed narrowly to exclude the members of the Committee, who are not the President, Vice-President, Chairman, Vice-Chairman, Secretary, Treasurer, etc. The argument that the Registrar has no jurisdiction under sub-section (1) of Section 78 of the said Act to remove a member of Committee or the Director of the Primary Agricultural Co-operative Credit Society from incurring disqualification under clause (ii) of Section 73EA of the said ::: Downloaded on - 09/06/2013 19:00:11 ::: 45 wp956.11.odt Act, is, therefore, rejected and it is held that there is power to remove a member of the Committee of Management of the said Society for incurring such disqualification.
32. Section 73EA of the said Act was introduced on 29-10-2007. This case is concerned with a disqualification of an office bearer of a defaulting Primary Agricultural Co-operative Credit Society ("the said Society") for being a Director of the District Central Co-operative Bank ("the said Bank") under clause (ii) of Section 73EA. It does not admit to any distinction between the defaults committed prior or subsequent to the introduction of Section 73EA. There is no question of prospectivity or retrospectivity in operation of the said provision. It operates as and when the situation or the event covered by clause (ii) occurs. If such situation or the event ::: Downloaded on - 09/06/2013 19:00:11 ::: 46 wp956.11.odt subsists on or before the date when a person is to be appointed or nominated or co-opted as a Director of the District Central Co-operative Bank or the State Co-operative Bank, then he will not be eligible for such appointment, nomination or co-option.
If in spite of this fact he is appointed, nominated or co-opted, then he incurs a disqualification for being continued as a Director of the District Central Co-operative Bank or the State Co-operative Bank. Therefore, the contention of S/Shri Ghare and Madkholkar that the name of the respondent No.4 was included in the list of validly nominated candidates for the election of the Director of the said Bank on 20-10-2007, i.e. before coming into force of Section 73EA of the said Act and, therefore, the disqualification under clause (ii) therein was not attracted, is rejected.
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33. The aforesaid point urged is no longer res integra in view of the decision of the Apex Court in the case of Pundalik v.
District Deputy Registrar, Co-operative Societies, Chandrapur and others, reported in (1991) 2 SCC 423. It was a case where the provision of Section 73FF of the said Act regarding disqualification was brought into force on 12-5-1986. The said provision provided for disqualification of being a member of the Committee if he is a defaulter of any Society. The appellant therein was a defaulter during the period from 31-1-1986 to 31-3-1986, i.e. prior to coming into force of the said provision. He was elected as a Director on 18-8-1986, he paid the arrears on 21-10-1986, and after issuing a show cause notice, he was removed being a defaulter under the said provision on 7-12-1986, which was ultimately maintained up to the Apex Court. Paras 11, 12 and 13 of the said decision are relevant and ::: Downloaded on - 09/06/2013 19:00:11 ::: 48 wp956.11.odt hence reproduced below :
"11. Mr. Sanghi, however, submits that the expression "makes default" or "stands disqualified"
being in praesenti the default must have been committed after the coming into force of Section 73-FF and that his default even, if any, was prior to that date and not after that date. We are unable to persuade overselves to accept this submission. The day an instalment falls due on its due date failure to pay results in default and that default continues from day to day until it is repaid.
Every day thereafter until payment results in making of default and, therefore, it could not be said that default could be on the due date only and thereafter no default but only liability. Considered by this principle the appellant can be said to have made default on the first day of his directorship and on every subsequent day till the instalment or instalments were paid. The submission, has, therefore, to be rejected."
"12. Similarly the submission that the default must have been one committed after the Act came into force has also to be rejected on the same ground that immediately on the Act coming into force the appellant was a defaulter and so long that default continued he must be taken to have made default until repayment."
"13. What then would be the consequence of such a ::: Downloaded on - 09/06/2013 19:00:11 ::: 49 wp956.11.odt default. Sub-section (2) of Section 73-FF says that a member who has incurred any disqualification under sub-section (1) shall cease to be a member of the committee and his seat thereupon be deemed to be vacant. Therefore, the moment the appellant after election continued to be in default, and, therefore, must be taken to have made default, stood disqualified and thereby ceased to be a member of the committee and his seat deemed to have fallen vacant. In this view of the matter the notice of the Deputy Registrar was in effect to say that the appellant had already ceased to be a Director and his seat already fell vacant. In Keshaorao Narayanrao Patil v. District Deputy Registrar Bombay High Court held that Section 73-FF(2) did not o0perate automatically and that passing of an order of removal was necessary. This has to be interpreted in the context of the provisions in the section."
34. The Apex Court has rejected the contention that it is the default in presenti, which is contemplated, and the default must have committed after coming into force of such provision of disqualification. It has been held that the moment the appellant therein after election continued to be in default stood disqualified and thereby ceased to be a member of the ::: Downloaded on - 09/06/2013 19:00:11 ::: 50 wp956.11.odt Committee. The argument that only the defaults committed after coming into force of Section 73FF are contemplated, has also been rejected.
35. In view of above, the contention of S/Shri Ghare and Madkholkar that the default contemplated under clause (ii) of Section 73EA, be construed as being in presenti, is rejected.
The another contention that the respondent No.4 has resigned as Director of the said Society on 30-9-2009, and, therefore, he ceases to be an 'office bearer of a defaulting Society' under clause (ii) of Section 73EA, is also rejected, for the reason that he was not eligible for being appointed, nominated or co-opted and was disqualified to be continued as the member of the Committee of the said Bank. Similarly, the clearance of the alleged outstanding dues of Rs.34.10 lacs on 30-3-2010 by the ::: Downloaded on - 09/06/2013 19:00:11 ::: 51 wp956.11.odt said Society did not have the effect of wiping out the disqualification under clause (ii) of Section 73EA of the said Act. Hence, the contention based upon clearance of dues is also rejected.
36. The next question is of the prior consultation with the Reserve Bank of India, as contemplated in Second Proviso below clause (ii) of sub-section (1) of Section 78 of the said Act.
Undisputedly, before passing the order of removal of the respondent No.4 on 12-5-2010, no consultation was done with the Reserve Bank of India. Relying upon the Proviso to sub-rule (2) of Rule 64 of the said Rules, it is urged by Shri Ghare for the respondent No.4 that there is a requirement of prior consultation with the Reserve Bank of India, which is mandatory, and non-compliance of it shall vitiate the action of ::: Downloaded on - 09/06/2013 19:00:11 ::: 52 wp956.11.odt removal.
37. Section 78 of the said Act deals with the power of removal of Committee or member thereof. It contemplates removal of Committee under clause (a)(i) and appointment of Committee of Administrators in place of it under clause (a)(ii).
In clause (b), removal of individual member of the Committee is contemplated. The Second Proviso below clause (b) of sub-section (1) of Section 78 states that the supersession or removal of the Committee of the District Central Co-operative Bank or the State Co-operative Bank under this sub-section shall not be done without prior consultation with the Reserve Bank of India. Section 78 nowhere uses the phraseology 'supersession' except in the Second Proviso. Therefore, the word 'supersession' or 'removal' employed under the Second Proviso ::: Downloaded on - 09/06/2013 19:00:11 ::: 53 wp956.11.odt are synonyms and carry one and the same meaning. The Second Proviso nowhere prescribes the requirement of prior consultation with the Reserve Bank of India before removal of a member of the Committee. Hence, if a member of the Committee is to be removed on account of incurring of disqualification by or under the said Act, the requirement of prior consultation under the Second Proviso below clause (b) of sub-section (1) of Section 78 of the said Act, with the Reserve Bank of India is not at all attracted.
38. The Proviso to sub-rule (2) of Rule 64 of the said Rules contemplates the requirement of consultation with the Reserve Bank of India, which has been introduced on 30-1-2012, i.e. much after the order under sub-section (1) of Section 78 was passed, hence it is not attracted in this case. Apart from this, ::: Downloaded on - 09/06/2013 19:00:11 ::: 54 wp956.11.odt bare perusal of the said Proviso shows that it is not the requirement of prior consultation with the Reserve Bank of India for removal of the member of the Committee. Hence, the aforesaid contention of Shri Ghare for the respondent No.4 is rejected.
39. Now coming to the question of effective prior consultation with the Federal Society, as contemplated under sub-section (1) of Section 78 of the said Act, undisputedly, a copy of the show cause notice issued to the respondent No.4 was forwarded to the Federal Society, i.e. the Maharashtra State Co-operative Bank Limited along with a copy of the reply to the show cause notice sent by the respondent No.4 and all the relevant documents. It is also not in dispute that the response is received from the Managing Director of the Federal Society ::: Downloaded on - 09/06/2013 19:00:11 ::: 55 wp956.11.odt stating that after taking into consideration the explanation furnished by the concerned Director, appropriate action should be taken at the level of the Divisional Joint Registrar in accordance with the provisions of the Maharashtra Co-operative Societies Act. It is also not in dispute that after receipt of this response, the respondent No.4 was heard in the matter and the order of removal under sub-section (1) of Section 78 was passed on 12-5-2010. The question is whether this complies with the requirement of prior effective consultation with this Federal Society.
40. The question of prior effective consultation has been the subject-matter of debate before the Apex Court as well as this Court since long. It is not necessary to multiply the decisions except to refer the decision of the learned Single Judge of this ::: Downloaded on - 09/06/2013 19:00:11 ::: 56 wp956.11.odt Court in the case of Ravindra V. Gaikwad, cited supra, which takes into consideration the decision of the Apex Court in the case of Kewalram, cited supra. It was a case of removal of a member of a Committee under sub-section (1) of Section 78 of the said Act. In response to the consultation sought by the Divisional Joint Registrar, the Federal Society by its letter dated 3-3-2001 opined that it did not express any opinion in the matter. The impugned order of removal stated that there is implied consent granted by the Federal Society and accordingly an order was passed. This Court set aside the order impugned of removal of a member of a Committee.
41. In the case of Ravindra V. Gaikwad's case cited supra, it was held in para 18 as under :
::: Downloaded on - 09/06/2013 19:00:11 ::: 57wp956.11.odt "18. The law being well settled by the decisions of the Apex Court in Kewalram's case which clearly requires the authority not only to place the materials before the Federal Society for consultation but, to insist upon expression of opinion of the Federal Society one way or the other before proceeding to take action under section 78 of the said Act, it cannot be said that in the absence of opinion in one way or other being expressed by the Federal Society, there would be an effective consultation in the matter. ..."
The learned Single Judge of this Court considered the case of Pundlik v. District Deputy Registrar, Co-operative Societies, Chandrapur and others, cited supra, decided by the Apex Court and also by this Court. It is thus apparent that the Authority is not only required to place the material before the Federal Society for consultation, but it has to insist upon the expression of opinion of the Federal Society one way or the other before taking any action under Section 78 of the said Act.
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42. The requirement of consultation under sub-section (1) of Section 78 of the said Act is with the 'Federal Society', which is defined under Section 2(13) of the said Act, and it reads as under :
"2(13) "federal society" means a society--
(a) not less than five members of which are themselves societies, and
(b) in which the voting rights are so regulated that the members which are societies have not less than four-fifths of the total number of votes in the general meeting of such society."
It is the 'Committee' of the Federal Society, as defined under Section 2(7) read with Section 73 of the said Act, which is required to be consulted under sub-section (1) of Section 78.
The requirement is of the meeting of minds of the members of the 'Committee of Management of Federal Society' amongst ::: Downloaded on - 09/06/2013 19:00:11 ::: 59 wp956.11.odt themselves and with the consulting authority, culminating into the passing of resolution either one way or the other. The consulting body must keep in mind the object of consultation, its statutory duty and obligation as a body of expert and it cannot sit tight over the issue or leave it to be tackled by any individual 'officer' of the Federal Society, as defined under Section 2(20) of the said Act. One may even think in such a situation that the provision sub-section (1) of Section 78 is attracted against the Federal Society for failure or negligence to perform duty or discharge obligation. Be that as it may, the record must disclose such a resolution and in the absence of it, there cannot be the compliance of effective consultation. The simple communication from the Managing Director, a paid-employee, without disclosing any authority from the Committee of a Federal Society is not the compliance of the requirement of ::: Downloaded on - 09/06/2013 19:00:11 ::: 60 wp956.11.odt consultation.
43. In the present case, all the material including the show cause notice and the reply along with the documents was forwarded to the Federal Society for consultation. It is not clear from the letter of response dated 7-5-2010 received from the Managing Director of the Federal Society as to whether this entire material was placed before the 'Committee', as defined under Section 2(7) read with Section 73, of the Federal Society and it has taken any decision one way or the other. It also does not disclose whether the matter was at all placed before the Committee or any resolution by the Federal Society taken in the matter of consultation. It is not clear as to whether the Managing Director was authorized by the Federal Society by its resolution to communicate such decision. Unless the record ::: Downloaded on - 09/06/2013 19:00:11 ::: 61 wp956.11.odt discloses the resolution by the members of the Managing Committee of the Federal Society with the Authority seeking consultation, it cannot be said that there was any effective consultation, as contemplated under sub-section (1) of Section 78 of the said Act. The order of removal of the respondent No.4 from the Director of the said Bank cannot, therefore, be sustained and it needs to be set aside for non-compliance of mandatory requirement of effective consultation with the Federal Society under sub-section (1) of Section 78 of the said Act.
44. In the show cause notice dated 22-2-2010 under sub-section (1) of Section 78 of the said Act, it is alleged that in the report of the District Deputy Registrar dated 18-2-2010, the Saoner Gram Vividh Karyakari Sahakari Sanstha Maryadit, of ::: Downloaded on - 09/06/2013 19:00:11 ::: 62 wp956.11.odt which the respondent No.4 is the office bearer, is in arrears of loan amount of Rs.34.10 lacs as on 30-9-2009, and hence the respondent No.4 stood disqualified under the provision of clause (ii) of Section 73EA of the said Act. In response to this show cause notice, the respondent No.4 has raised an objection on 6-4-2010 stating that the said show cause notice does not disclose as to when such amount was sanctioned to the said Society, what were the terms of repayment of loan in the agreement, when the payments became due, when was the notice of demand issued claiming the outstanding dues, etc. It is stated that the show cause notice is totally vague and unspecific.
It is urged that in the absence of details of the charge, there is a failure to provide an effective opportunity to raise the defence, which has not only caused the prejudice, but it also violates the mandatory provision of sub-section (1) of Section 78 of the said ::: Downloaded on - 09/06/2013 19:00:11 ::: 63 wp956.11.odt Act and also the principles of natural justice.
45. Shri Paliwal for the petitioner has urged that in the show cause notice, the report of the NABARD and that of the District Deputy Registrar were referred to. The respondent No.4 has taken inspection of it, and even otherwise he being the Director of the said Society, is deemed to be aware of the defaults committed by the said Society. He submits that the requirement is substantially complied with, indicating the arrears of loan outstanding of Rs.34.10 lacs as on 30-9-2009, and it is, therefore, presumed that there were defaults committed by the said Society in payment of loan on due dates. He has urged that no prejudice is demonstrated and in the absence of it, the order cannot be declared to be invalid. He has relied upon the two decisions of the Apex Court in the cases of - (i) State ::: Downloaded on - 09/06/2013 19:00:11 ::: 64 wp956.11.odt Bank of Patiala and others v. S.K. Sharma, reported in (1996) 3 SCC 364 (Paras 33 to 35); and (ii) Ashok Kumar Sonkar v.
Union of India and others, reported in (2007) 4 SCC 54 (Paras 26 to 32).
46. What is the extent of opportunity to state the objection is provided to the person proposed to be removed under sub-section (1) of Section 78 on the ground of disqualification under clause (ii) of Section 73EA of the said Act, is required to be seen. The member, who is removed in terms of these provisions, is not eligible to be re-elected, re-appointed, re-nominated or re-co-opted as the member of the Committee till the expiry of the next full term of the Committee from the date when he has been so removed, as provided in the Proviso below clause (b) of sub-section (1) of Section 78 of the said Act.
::: Downloaded on - 09/06/2013 19:00:12 ::: 65wp956.11.odt It is a drastic action affecting the civil rights. The requirement is, therefore, mandatory.
47. The intention to issue show cause notice is to furnish an effective opportunity to the person concerned to raise an objection or defence and to grant him a fair hearing in the matter. The person sought to be removed must know the case, which he has to meet, and he should be able to state that the grounds for proposed removal are non-existent or that they ever existed or that they do not justify the action proposed to be taken. The show cause notice, therefore, must state all the material facts, particulars and the provisions of law clearly constituting the charge of disqualification and establishing the connection of the person sought to be removed with the ground of such removal on account disqualification alleged. It cannot ::: Downloaded on - 09/06/2013 19:00:12 ::: 66 wp956.11.odt be the defence of the Authority acting under sub-section (1) of Section 78 of the said Act that the person removed on account of incurring of disqualification was aware of the material facts and particulars, as he himself is the Director/office bearer of the defaulting Primary Agricultural Co-operative Credit Society.
48. In the case of Shankarlal Govindram Gunwani and others v. State of Maharashtra and others, reported in 2011(2) Mh.L.J. 673, I have taken the view in para 11 as under :
"11. ...The requirement under section 78(1), is to provide an effective opportunity to defend the proceedings and it is mandatory. In view of this, it is implicit requirement of section 78(1) of the said Act, to state all material facts and particulars as well as the provisions of law, if any, to spell out or constitute a specific charge or charges on which the Committee, or its member is sought to be removed. It is the duty and obligation of the Registrar to supply such information in the show cause notice under section 78(1) of the said ::: Downloaded on - 09/06/2013 19:00:12 ::: 67 wp956.11.odt Act. It is not expected that the person or persons charged under section 78(1) to search or make an inquiry to find out the material facts and particulars of charge and the law applied, to first understand the nature of charge and then to furnish the explanation. Failure to perform such duty or to discharge the obligation, to spell out or constitute a specific and definite charge of removal, would vitiate the findings, not only on the ground of breach of the principles of natural justice but also on the ground that the action is in breach of mandatory requirement of providing effective opportunity to furnish explanation or raise an objection as contemplated by section 78(1) itself."
49. Keeping in view the aforesaid position of law, the provision of clause (ii) of Section 73EA of the said Act is required to be seen. It states that no person shall be eligible for being appointed, nominated, co-opted or for being a Director of the District Central Co-operative Bank, if he is an office bearer of the defaulting Primary Agricultural Co-operative Credit Society. The expression 'defaulting Primary Agricultural Co-operative Credit Society' has not been explained or defined ::: Downloaded on - 09/06/2013 19:00:12 ::: 68 wp956.11.odt anywhere either under the Act or under the Rules. The term 'default' is defined in Garner's Black's Law Dictionary, Ninth Edition, as under :
" 'default' - The omission or failure to perform a legal or contractual duty; esp., the failure to pay a debt when due.
'default' - 1. To be neglectful; esp., to fail to perform a contractual obligation. 2. To fail to appear or answer.
3. To enter a default judgment against a litigant."
In the context in which such provision is made, the expression 'defaulting Primary Agricultural Co-operative Credit Society' would mean such a Society, which is committing defaults in making payment of loan on due dates.
50. A due date for payment of loan by such Society can be determined only on the basis of the agreement or contract of the ::: Downloaded on - 09/06/2013 19:00:12 ::: 69 wp956.11.odt loan amount. A due date may be monthly, bimonthly, quarterly, six-monthly or annually and it will depend upon the terms and conditions incorporated in such agreement or contract for advancement of loan between the Primary Agricultural Co-operative Credit Society and the District Central Co-operative Bank. Similar is the case in respect of the actual amount of repayment of loan on due dates. Unless a reference is made in the show cause notice to any such agreement or contract giving the due date and the amount for repayment of loan, it was not possible for the respondent No.4/objector, to find out as to whether there was a default in repayment of loan by such Society, to state whether the defaults alleged are non-existent or that they ever existed or that they do not justify the action proposed to be taken. There is a total failure in the show cause notice to establish connection of the respondent ::: Downloaded on - 09/06/2013 19:00:12 ::: 70 wp956.11.odt No.4/objector with the disqualification alleged. These are all the factual aspects and an opportunity to raise a dispute in respect of it was required to be provided. In the absence of this, it is a clear case of 'no notice' and 'no hearing'.
51. The learned AGP for the respondent Nos.1 and 2 has produced the entire record before this Court. I have gone through the said record and it does not disclose any material except the facts as are alleged in the show cause notice, viz. that the said Society is in arrears of Rs.34.10 lacs as on 30-9-2009.
Even the loan agreements are not the part of the record. The respondent No.4 is not expected to find out what the exact charge of disqualification is, to search for the material facts and particulars either by calling the record from the said Society or from the said Bank, and then to furnish his reply according to ::: Downloaded on - 09/06/2013 19:00:12 ::: 71 wp956.11.odt his understanding of the charge, more particularly when it is not a case of his individual default, but he is to be removed as an office bearer of a defaulting Primary Agricultural Co-operative Credit Society. The argument that the respondent No.4 being the Director of the said Society and the said Bank is presumed to know all the necessary facts and particulars, is not the argument, which can be accepted in law.
52. It is a case where out of 28 members of the Committee of the said Bank, 14 members/office bearers of the Primary Agricultural Co-operative Credit Society, who are also the members of the Committee of the said Bank have been removed on account of disqualification under clause (ii) of Section 73EA of the said Act. The show cause notices issued to all the 14 members of the said Bank are commonly worded, except the ::: Downloaded on - 09/06/2013 19:00:12 ::: 72 wp956.11.odt names of such members, the Societies of which they are the office bearers and the amount of loan said to have been outstanding against each such Society. The agreements or contracts between all such Primary Agricultural Co-operative Credit Society and the Bank are different, so also the dates of payment of dues and the amount of installments vary. In a given case, there may be supplementary or additional agreement varying the terms of the original agreement, altering the mode of repayment of loan, and the said Bank may have condoned the defaults in payment of loan on due dates or could have provided some relaxation. In such a situation, though there may be arrears of loan, it would be possible for the objector to urge that the facts stated in the show cause notice do not justify the action proposed to be taken.
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53. The decisions relied upon by Shri Paliwal for the petitioner in the cases of State Bank of Patiala and Ashok Kumar Sonkar, cited supra, in fact support the view that in the case of 'no notice' and 'no hearing', the question of prejudice will not be of any significance. The said judgments would support the case of the respondent No.4 rather than the case of the petitioner on facts. Hence, the show cause notice dated 22-2-2010 and the order dated 12-5-2012 passed under sub-section (1) of Section 78 of the said Act are liable to be set aside on the ground of non-compliance of the mandatory requirement providing an effective opportunity to state an objection or raise a defence and the breach of the principles of natural justice.
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54. Lastly, it is pointed out by the respondent Nos.3 and 4 that the order of removal under sub-section (1) of Section 78 of the said Act was passed against 14 Members of the Managing Committee of the said Bank, out of total 28 Members. All the 14 Members preferred separate appeals before the State Government under Section 152 of the said Act.
The Minister has set aside the order of removal in respect of all the 14 Members of the Managing Committee of the said Bank.
However, the writ petitions are preferred challenging the order of removal in respect of only eight Members of the Managing Committee of the said Bank. The orders in respect of remaining six Members of the Managing Committee passed by the Hon'ble Minister have not been challenged. The argument is that the petition is purely politically motivated and it has been filed with an intention viz. (i) to protect the Members of the ::: Downloaded on - 09/06/2013 19:00:12 ::: 75 wp956.11.odt Managing Committee who have affiliation with the political group to which the petitioners in all these petitions belong, and
(ii) to dislodge the respondent No.4 in all these petitions, who do not belong to such class of members. It is the submission, that if the orders of the Minister impugned in all these petitions are set aside and the order passed under sub-section (1) of Section 78 of the said Act removing the respondent No.4 in all these petitions is maintained, then the remaining Members of the Managing Committee who are similarly placed and were disqualified shall continue to enjoy the office.
55. A specific question was put to the learned counsels appearing for the respondent Nos. 3 and 4 to point out any authority for the proposition that this Court can refuse to issue a writ of certiorari to quash the orders passed by the Minister and ::: Downloaded on - 09/06/2013 19:00:12 ::: 76 wp956.11.odt restoring the order of removal under sub-section (1) Section 78 of the said Act on the ground that the petition is politically motivated and mala fide, as urged. However, the learned Counsels were unable to point out any such authority for the proposition. Be that as it may, since this petition itself is being dismissed and the writ as asked for is not being issued, the question loses its significance and does not call for any adjudication. This Court cannot determine the fate of remaining six Members of the Managing Committee of the said Bank, in the absence of any challenge to the orders passed by the Hon'ble Minister in their matters and for want of they being joined as parties in all these petitions. It will be open for the authority under sub section (1) of section 78 of the said Act to adopt such course of action in respect of them as it deems fit, in the light of this decision and in accordance with law.
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56. For the reasons stated above, it is concluded as under :
(i) The respondent No.4 Prafulla Khushalrao Mankar being the Director/Member of the Committee of Management of the said Society is an 'office bearer' within the meaning of clause (ii) of Section 73EA of the said Act.
(ii) The argument that the Registrar has no jurisdiction under sub-section (1) of Section 78 to remove a member of the Committee or the Director of the Primary Agricultural Co-operative Credit Society for incurring disqualification under clause (ii) of ::: Downloaded on - 09/06/2013 19:00:12 ::: 78 wp956.11.odt Section 73EA of the said Act, is rejected, and it is held that there is a power to remove a member of the Committee of Management of the said Society for incurring such disqualification.
(iii) The contention that the name of the respondent No.4 was included in the list of validly nominated candidates for election of the Director of the said Bank on 20-10-2007, i.e. before coming into force of Section 73EA of the said Act with effect from 29-10-2007, and, therefore, the disqualification under clause (ii) therein was not attracted, is rejected.
(iv) The contention that the respondent No.4 has resigned as the Director of the said Society on ::: Downloaded on - 09/06/2013 19:00:12 ::: 79 wp956.11.odt 30-9-2009 and, therefore, he ceases to be an 'office bearer of a defaulting Society' under clause (ii) of Section 73EA of the said Act, is also rejected.
(v) It is held that the clearance of the alleged outstanding dues of Rs.34.10 lacs on 30-3-2010 by the said Society did not have the effect of wiping out the disqualification under clause (ii) of Section 73EA of the said Act.
(vi) If a member of the Committee is to be removed on account of incurring of disqualification by or under the said Act, the requirement of prior consultation under the Second Proviso below clause (b) of sub-section (1) of Section 78 of the said Act with the Reserve Bank of ::: Downloaded on - 09/06/2013 19:00:12 ::: 80 wp956.11.odt India, is not at all attracted.
(vii) The Proviso to sub-rule (2) of Rule 64 of the said Rules introduced on 30-1-2012 does not prescribe the requirement of prior consultation with the Reserve Bank of India for removal of the member of the Committee, and hence it is not attracted.
(viii) The order of removal of the respondent No.4 from the post of the Director of the said Bank is set aside for non-compliance of the mandatory requirement of effective consultation with the Federal Society under sub-section (1) of Section 78 of the said Act.
(ix) The show cause notice dated 22-2-2010 and the ::: Downloaded on - 09/06/2013 19:00:12 ::: 81 wp956.11.odt order dated 12-5-2012 passed under sub-section (1) of Section 78 of the said Act are liable to be quashed and set aside on the ground of non-compliance of the mandatory requirement of providing an effective opportunity to state an objection or raise a defence and the breach of the principles of natural justice. The Authority acting under sub-section (1) of Section 78 of the said Act has failed to apply its mind to this important aspect of the matter and hence the order vitiated on that ground also.
57. Hence, the following order is passed :
(a) The order passed by the Hon'ble Minister holding that the respondent No.4 was not an office bearer of the ::: Downloaded on - 09/06/2013 19:00:12 ::: 82 wp956.11.odt said Society and hence there was no jurisdiction to pass an order of removal under sub-section (1) of Section 78 for disqualification under clause (ii) of Section 73EA of the said Act cannot be sustained, and hence it is quashed and set aside to that extent.
(b) The order holding that the respondent No.4 was validly nominated candidate for the post of Director of the said Bank on 20-10-2007, i.e. before coming into force of the provisions of Section 73EA of the said Act with effect from 29-10-2007, also cannot be sustained, and it is, therefore, quashed and set aside to that extent.
(c) The order of the Hon'ble Minister holding that on 31-3-2010 the entire loan amount was paid by the said ::: Downloaded on - 09/06/2013 19:00:12 ::: 83 wp956.11.odt Society and, therefore, the respondent No.4 could not be disqualified as an office bearer of the defaulting Society, cannot be sustained, and it is quashed and set aside to that extent also.
(d) The order passed by the Hon'ble Minister holding that there was no effective consultation, as required by sub-section (1) of Section 78 of the said Act, with the Federal Society and thereby quashing the order of removal of the respondent No.4, does not call for any interference.
(e) The show cause notice dated 22-2-2010 and the order dated 12-5-2012 passed under sub-section (1) of Section 78 of the said Act are also liable to be quashed ::: Downloaded on - 09/06/2013 19:00:12 ::: 84 wp956.11.odt and set aside on the additional ground that there is a non-compliance of the principles of natural justice and the mandatory provision of providing an effective opportunity to state an objection and to grant fair hearing to the respondent No.4 and hence the order impugned does not call for any interference.
58. In the result, the petition is dismissed. Rule is discharged. Needless to say that since it is a case of continuing alleged disqualification, it will be open for the Authority acting under sub-section (1) of Section 78 of the said Act to initiate fresh action for removal of the respondent No.4 on account of incurring of disqualification under clause (ii) of Section 73EA of the said Act. No order as to costs.
JUDGE.
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