Shree Vavdi Seva Sahakari Mandali ... vs State Of Gujarat on 23 December, 2019

[Cites 24, Cited by 1]

Gujarat High Court

Shree Vavdi Seva Sahakari Mandali ... vs State Of Gujarat on 23 December, 2019

Bench: Biren Vaishnav

       C/SCA/11321/2017                                        CAV JUDGMENT




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 11321 of 2017


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR.JUSTICE BIREN VAISHNAV

==========================================================

1     Whether Reporters of Local Papers may be allowed to
      see the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy of the
      judgment ?

4     Whether this case involves a substantial question of law
      as to the interpretation of the Constitution of India or any
      order made thereunder ?

==========================================================
             SHREE VAVDI SEVA SAHAKARI MANDALI LIMITED
                               Versus
                    STATE OF GUJARAT & 4 other(s)
==========================================================
Appearance:
MR BHARAT T RAO(697) for the Petitioner(s) No. 1
MS. MANISHA LAVKUMAR, GOVERNMENT PLEADER with MS. NIDHI
VYAS, AGP (1) for the Respondent(s) No. 1
MR CHIRAG B PATEL(3679) for the Respondent(s) No. 4
NOTICE SERVED BY DS(5) for the Respondent(s) No. 2,3,4,5
==========================================================

    CORAM: HONOURABLE MR.JUSTICE BIREN VAISHNAV

                               Date : 23/12/2019

                                CAV JUDGMENT

1. In this petition under Article 226 of the Constitution of India the petitioner has prayed for the following reliefs:

Page 1 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

"(A) To admit and allow this petition; (B) To issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, quashing and setting aside the orders dated 6.5.2017 passed by the respondent no.2 rejecting the application of the petitioner for joining party and also order dated 2.6.2017 passed by the respondent no.2 dropping the show cause notice issued against respondent no.4 for removal under Rule-32 of the Rules for the reasons stated in the memo of the petition and in the interest of justice;"

2. The prayers arise in the following background of facts:

2.1 The petitioner is a Primary Co-operative Society registered under the Gujarat Co-operative Societies Act, 1961 and is an affiliated member of the Jamnagar District Co-

operative Bank, Respondent No.5. It is the case of the petitioner that one Shree Nandasana Juth Seva Shakari Mandali is a defaulter Society vis-à-vis the Jamnagar Bank is concerned and therefore the members of the Society are not eligible to contest the election of the Board of Directors of the Jamnagar District Co-operative Bank Ltd. 2.2 According to the petitioner, the Nandasana Society has an outstanding amount of loans as on 30.06.2015 to the tune of Rs.1,45,56,758/- and therefore being a defaulter the Respondent No.4 - Shri Brijrajsinh Hemantsinh Jadeja has incurred a disqualification under Section 27(2) read with Rule 32 of the Gujarat Co-operative Societies Act, 1961 and therefore cannot hold the post of the Director of the Jamnagar District Co-operative Bank Ltd.

2.3 The petitioner's case is that as the respondent State Authorities were not taking any action for removal of the respondent No.4 as the Director of the Bank, the petitioner was initially constrained to address a legal notice relying on Bye-Law 30(x) of the Bank read with the Rules and thereafter Page 2 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT file a Special Civil Application No.16893 of 2016 wherein a Writ of Mandamus was prayed for, to issue a direction to the State Authortities to initiate proceedings under Rule 32 r/w Section 27(2) of the Gujarat Co-operative Societies Act, 1961 against the Respondent No.4. The petitioner also filed an application to be joined as a party before the authority which initiated action against the respondent No.4 by issuing a show cause notice dated 16.04.2017. The petitioner's application was however rejected by the respondent by an order dated 6.05.2017.

2.4 On a reply filed to the show-cause notice by the respondent No.4 Brijrajsinh, the competent authority i.e. the Registrar Co-operative Societies Gandhinagar, has by his order dated 02.06.2017 dropped the proceedings of the Show- Cause notice against Brijrajsinh - respondent No.4. Being aggrieved by these orders dated 06.05.2017 and 02.06.2017 the petitioner society has preferred this petition under Article 226 of the Constitution Of India.

3. Mr. B.T. Rao, learned advocate for the petitioner has taken me through the relevant pages of the Paper Book of the Petition namely pages 96A, 97 to 99 and 100 wherein as per the Statement of Accounts of the Bank, the Nandasana Juth Society has an outstanding amount of loans against the Jamnagar Bank. He submitted that it is therefore undisputed that the said Society is a defaulter of the Bank. Inviting my attention to the communication at Page 109 of the petition, Mr. Rao would submit that the request of the Bank to take inspection was not agreed to.

3.1 Mr Rao then invited my attention to the contents of the Page 3 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT legal notice at Page 60 and submitted that as per Rule 32 read with bye law 30(x) of the Bank, the Nandasana Juth Sahakari Mandali is a defaulter and as the respondent No.4 was authorized to contest elections of the Bank and once the Society itself is a defaulter the respondent No.4 cannot be permitted to hold the office of the Director of the Bank as the delegate/representative of the Society in default.Extensive reliance was placed on Rule 32 read with the bye-law 30 (x) to contend that once the society had defaulted it could be eligible to vote and therefore had incurred a disqualification.

3.2 Reliance was also placed on a identical order dated 9/12/2015. Mr Rao relied on the Division Bench decision in the case of Gujarat State Co-operative Bank Ltd and Anr.versus State Of Gujarat and Others reported in 2009(1) GLH 371 to submit that where a co-operative society is defaulted the submission is that the word "person" under Section 27(2) would include a co-operative society and its delegate and therefore in view of the decision the findings of the Registrar that as the Respondent No.4 was as an individual member not a defaulter, he could not be disqualified.

3.3 Mr Rao further assailed the order of the Registrar inasmuch as there was non application of mind by the Registrar; that the Bank had not opposed or placed its stand when the Jamnagar Bank had stated that it was an admitted position that the Nandasana Juth Shakari Mandali was a defaulter and that the Respondent No.4 was a delegate of the Society and hence disqualified.

Page 4 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

4. Mr B.S.Patel, learned Senior Advocate assisted by Mr. Chirag Patel, learned advocate, appeared for the respondent No.4 Brijrajsinh.

4.1 Mr.Patel, learned advocate, submitted that there is a subtle distinction between right to vote and the right as an elected member. One can be disqualified to vote and also be disqualified to continue as a Director. 4.2 If the Nandasana Society had committed default it would not be entitled to be enrolled as a voter whereas in the individual capacity if the respondent no.4 as a member of the Nandasana Society had paid his dues then he as a member of the society was qualified to vote and therefore be appointed as a member of the committee.Reliance was placed on Rule 32 of the Rules and Section 27 of the Gujarat Co-operative Societies Act,1961.He would submit that Bye-Law 30(x) has no force of law.

4.3 Mr Patel, learned advocate, further submitted that the Petitioner had earlier filed a petition. The Court in Paras 6 to 8 had recorded the statement on behalf of the government that action was initiated against the Respondent and therefore the writ of mandamus was not pressed. The Petitioner clearly had then conceded that the State had initiated proceedings and therefore that needed to be done at his hands anymore.As a Society it had no locus to challenge the order of the Registrar and the order dated 6/5/2007 by which the society's application to be joined as a party was rejected the society had no say.

4.4 In support of his aforesaid submission Mr Patel, learned advocate, relied on a decision of the Supreme Court in the case of Ravishankar Bhoir versus District Collecor,Raigad reported in (2012) 4 SCC 407 ;

Page 5 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

particularly on paras 58 to 61.He would submit that once the complainant has moved the machinery there is nothing further that needs to be done. The Petitioner therefore now cannot assail the order of the Registrar dropping the proceedings.

4.5 He also relied on a decision of the Supreme Court in the case of Daman Singh and others v. State Of Punjab reported in AIR 1985 SC 973 (Para 11) to submit that once a person becomes a member he loses his individuality qua the society and he has no independent rights. 4.6 Mr Patel, learned advocate, further submitted that the Jamnagar Bank has not challenged the Order of the Registrar,the body of which the Respondent No.4 is the Director.

4.7 Mr.Patel, learned advocate, invited my attention to the statement made in Para 2 of the Petition that the Petitioner is an affiliated member of the Jamnagar Bank. He submitted that there are 400 affiliated members and therefore nobody has challenged it.

4.8 Reliance was placed on a decision of the Supreme Court in the case of Co-operative Central Bank Ltd & Ors., vs. Additional Industrial Tribunal, Andhra Pradesh & Ors., reported in AIR 1970 SC 245, para 10 to submit that the bye-laws have no force of law.

4.9 Section 27(2) and Section 145F were read to submit that a person has a right to vote and in the event he has defaulted in payment of loans he may not be entitled to exercise voting rights as a member of a society. 4.10 Reading Section 145F he would submit that it deals with disqualification for membership. A person shall be disqualified for being elected and for being a member of the Page 6 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT Committee of any Society if he is disqualified under any provisions of the Act.Rule 32 has to be read in that context to suggest that as long as a member has not defaulted in loans he is entitled to vote and therefore shall be eligible to be appointed as a member of a committee. Only if there is a default of the member is accordance with sub-rule(1) of rule 32 he would incur disqualification.

5 Ms.Manisha Lavkumar Senior Advocate and Government Pleader assisted by Ms Nidhi Vyas, learned Assistant Government Pleader appeared for the State and made the following submissions:

5.1 The Jamnagar District Bank has jurisdiction of Jamnagar,Devbhoomi Dwarka and a few villages of Jodiya.Nandasana is a Society in Jamjodhpur.Its a Primary Agricultural Co-operative Society of Jamjodhpur.The Petitioner is a Primary Agricultural Co-operative Society of Jodiya.

5.2 Inviting my attention to the Bye-Law 30 of the bye-

laws, Ms Lavkumar would submit that the Board of Directors of the Jamnagar District Co-operative Bank comprises of 16 members. 14 elected members comprise of 10 representatives from the primary agriculture credit co-operative societies from 10 taluks. The 10 Directors representing taluka-wise primary agricultural credit societies are on the Board. The Petitioner belongs to Jodiya constituency and therefore has no locus to challenge the holding of a post of a Director of Jamjodhpur which is representative of all societies of that constituency.

5.3 On the locus of the Petitioner to approach this Court Ms Lavkumar Shah would submit that no mandamus in the Page 7 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT earlier petition was prayed for. Statement of the Assistant Government Pleader was recorded and therefore action was initiated. Once initiated and order passed, the petitioner cannot challenge the said order. She would further submit that the order rejecting the Application of the Petitioner was dated 6/5/2017 and the order of the Registrar is 2/6/2017. The Petition was filed on 13/6/2017.The elections were held on 29/4/2015 and the default is after the election i.e. on 30/6/2015 even otherwise the order is therefore valid. 5.4 She also read out extensively the provisions of the Act namely Section 27,74C,145F Rule 32 and definitions under Section 2(13) and 2(19) of the Act and submitted that the Respondent No.4 as a member of the Nandasana Society had not defaulted and therefore was entitled to vote.As per Rule 32 he was therefore eligible to be appointed as a member of the Managing Committee. Therefore default of the Society has no nexus with his appointment as a Director of the Bank. Moreover he had made out a case that he had paid dues,the Secretary had misappropriated for which proceedings were launched.

5.5 In the submission of Ms.Shah, learned Government Pleader, disqualification under Section 145F of being elected as a Member of the Committee of a specified Society if he is other disqualified has no nexus with the respondent's right to vote in and therefore he will not be disqualified because of a default of the Society.Reliance was placed on the Circular in the decision of the Gujarat High Court in the case of Co- operative Bank (supra) and the circular of the State which made out a distinction.

6. Having considered the submissions of the respective Page 8 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT Advocates what needs to be considered is:

a).Whether the Petitioner, a primary agricultural co-

operative society of Jodiya has locus to file the present petition?

b).Whether the order dated 2/6/2017 passed by the Registrar is otherwise erroneous?.

6.1 On the question of locus standi the order dated 3/4/2017 passed by this Court in Special Civil Application No.16893 of 2016 needs to be appreciated. The Petitioner had sought a prayer and a writ of mandamus directing the respondent to initiate proceedings under Rule 32 r/w Section 27(2) of the Gujarat Co-operative Societies Act,1961.The Government in that petition made a statement that they are otherwise also going to initiate proceedings against the respondent no.4.The Court disposed of the petition on such a statement.

6.2 The petitioner then in the proceedings of the show cause notice applied for being joined as a party. That application was rejected. Considering the decision in the case of Ravi Shankar Bhoir (supra) what is evident that the Petitioner cannot claim to be an adversarial litigant. At the behest of the Petitioner the State machinery got into action and issued a show-cause notice to the respondent no.4,heard him and took a decision. The Petitioner cannot have a lis. The petitioner is of a constituency of Jodiya which has a right to elect one Director of the 10 on behalf of the Primary Agriculture Societies. The Respondent No.4 was of the Jamjodhpur Constituency and was a representative of the wide electorate there.The Petitioner was therefore a rank outsider.The Petitioner has not been deprived of or denied any legal right or has any legally protected interest.

Page 9 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

6.3 The Supreme Court in the case of Bhoir (supra) held as under:

"58. Shri Chintaman Raghunath Gharat, ex-President was the complainant, thus, at the most, he could lead evidence as a witness. He could not claim the status of an adversarial litigant. The complainant cannot be the party to the lis. A legal right is an averment of entitlement arising out of law. In fact, it is a benefit conferred upon a person by the rule of law. Thus, a person who suffers from legal injury can only challenge the act act or omission. There may be some harm or loss that may not be wrongful in the eye of the law because it may not result in injury to a legal right or legally protected interest of the complainant but juridically harm of this description is called damnum sine injuria.

59. The complainant has to establish that he has been deprived of or denied of a legal right and he has sustained injury to any legally protected interest. In case he has no legal peg for a justiciable claim to hang on, he cannot be heard as a party in a lis. A fanciful or sentimental grievance may not be sufficient to confer a locus standi to sue upon the individual. There must be injuries or a legal grievance which can be appreciated and not a stat pro ratione voluntas reasons i.e. a claim devoid of reasons.

60. Under the garb of being a necessary party, a person cannot be permitted to make a case as that of general public interest. A person having a remote interest cannot be permitted to become a party in the lis, as the person who wants to become a party in a case, has to establish that he has a proprietary right which has been or is threatened to be violated, for the reason that a legal injury creates a remedial right in the injured person. A person cannot be heard as a party unless he answers the description of aggrieved party. ( Vide Adi Pherozshah Gandhi v. Advocate General of Maharashtra, Jasbhai Motibhai Desai v. Roshan Kumar, Maharaj Singh v. State of U.P., Ghulam Qwadir v. Special Tribunal and Kabushiki Kaisha Toshiba v. Tosiba Applicances Co.) The High Court failed to appreciate that it was a case of political rivalry. The case of the appellant has not been considered in the correct perspective at all.

61. In such a fact situation, the complaint filed by Respondent 5 could at the most be pressed into service Page 10 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT as a material exhibit in order to collect the evidence to find out the truth. In the instant case, as all the charges proved against the appellant have been dealt with exclusively on the basis of documentary evidence, there is nothing on record by which the complainant could show that the general body meeting was not called, as statutorily required, by the appellant intentionally."

6.4 Accordingly the application for being joined as a party was rightly rejected by the official respondent by his order dated 6/5/2017 and therefore the Petitioner Society has no locus to file the present petition and therefore on this ground alone the Petition deserves to be dismissed. 6.5 Let us consider the legal provisions and then view the case on merits. The relevant sections of the Act are as below:

"27 Right to vote:- (1) No person shall exercise the rights of a member of a society, until he has made such payment to the society in respect of membership, or acquired such interest in the society, as may be prescribed by the rules, or the bye-laws of such society. (2) The person who has committed a default and remains as such defaulter in making repayment of loan or interest thereon for a period of one year from the due date of repayment of such loan or interest or installment shall not be entitled to exercise voting rights of a member of a society till all such repayment are made. (3) No person shall exercise the right to vote at an election of a member of a committee in a financial year unless he is a member of the society for the whole of the financial year preceding the financial year in which the election is being held:

provided that no member society of a federal society shall exercise the right to vote at an election of a member of a committee unless such society has its last accounts audited in class A, B or C. (4) Nothing in sub-section (3) shall apply to the first election of a committee to be held immediately after the registration of a society.

28 Voting powers of members:- (1) No member of any society shall have more than one Page 11 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT vote in its affairs: provided that in the case of an equality of votes the Chairman shall have a casting vote. (2) Where a share of a society is held jointly by more than one person, each such person shall have, in the absence of preceding person or persons, a right to vote: Provided that such person is present and is not a minor. (3) A society which has invested any part of its funds in the shares of another society, may appoint one of its members to vote on its behalf in the affairs of that other society, and accordingly such member shall have the right to vote on behalf of the first society:

Provided that the first society shall not appoint any of its members who is also its paid employee. (4) A company or any other body corporate constituted under any law for the time being in force which has invested any part of its funds in the shares of a society may appoint any one of its directors or officers to vote on its behalf in the affairs of such society; and accordingly such director or officer shall have the right to vote on behalf of the company or the body corporate, as the case may be. (5) where a firm has invested any part of its funds in the shares of a society, any one of its partners appointed by the firm shall be entitled to vote in the affairs of the society on behalf of the firm. (6) A local authority or public trust which has invested any part of its funds in the shares of a society may appoint any of its members or trustees to vote on its behalf in the affairs of that society; and accordingly, such person shall have the right to vote on behalf of the local authority or the public trust, as the case may be. (7) No nominal or sympathiser member shall have the right to vote and no such member shall be eligible to be a member of a committee or for appointment as a representative of the society on any other society. (8) The voting rights of individual members of a federal society shall be such as may be regulated by the rules and by the bye-laws of the society.

28A Attendance of meeting by members:- It shall be the duty of every member of a society-- (I) to attend atleast two meetings of the general body within a consecutive period of five years. (ii) to utilize minimum level of services as prescribed in Page 12 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT the bye-laws : Provided that a member-(i) who does not attend atleast two meetings of the general body for a consecutive period of five years; or (ii) who does not utilize minimum level of services as prescribed in the bye-laws for a consecutive period of five years in respect of such societies as the State, Government may, by notification in the official Gazette, declare; shall be liable to be removed by the Registrar as the member of the society:] Provided further that before removing such person from the membership of the society, he shall be afforded an opportunity of being heard and if his explanation is found satisfactory, his name shall not be removed from the membership of the society.

28B. Provision for co-operative education and training to members:- The State Government may impart co-operative education and training to the members of the co-operative societies so as to enable them to effectively manage the affairs of the society.

XXX XXXX XXXX XXXX 74C. Provision for conduct of elections of committees and officers of certain societies and term of office of members of committees:-

(1) The election of members of the committees and of the officers by the committee, of the societies of the categories mentioned below shall be subject to the provisions of Chapter XI-A and shall be conducted in the manner laid down by or under this Chapter:-

[(I) Apex societies mentioned in the Schedule and such other apex societies as the State Government may, by general or special order, published in the Official gazette, from time to time specify in this behalf, having regard to financial position and share capital of such societies;]

(ii) all District Central Co-operative Banks;

(iii) all Primary Land Development Banks:

(iv) (a) all District Co-operative Sale and Purchase Organisation;

(b) all Taluka Co-operative Sale and Purchase organisation;

(v) all Co-operative Sugar Factories;

Page 13 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

(vi) all Co-operative Spinning Mills;

[(vi-a] all district co-operative milk unions; (vi-b) any other society or class of societies, which the State Government may, by general or special order published in the Official Gazette, from time to time specify in this behalf, regard being had to the financial position and share capital of such institutions.

[(2)(i) The term of the elected members of the managing committee shall be five years from the date of election.

(ii) The term of office bearers of the managing committee shall be two and a half years from the date of election.

(iii) The managing committee shall fill up a casual vacancy within a period of sixty days from the date of such vacancy, failing which the State Government shall have the power to fill up such casual vacancy out of the same, class of categories of members in respect of which the casual vacancy has arisen if the remaining term of office of the managing committee is less than half of its original term.

(iv) The elected members of the managing committee and its office bearers shall cease to hold the office on the date of expiry of their term.

(v) Notwithstanding anything contained in clause

(ii), the office bearers of managing committee who have completed two and a half years on the date of the commencement of the Gujarat Co-operative Societies (Amendment) Act, 2015, shall continue to be such office-bearer for the remainder term.

(vi) Nothing in clause (I) shall be applicable to the managing committee existing on the date of coming into force of the Gujarat Co-operative Societies (Amendment) Act, 2015.

(vii) The office bearers of the managing committee shall be eligible for re-election.] (3) Notwithstanding anything contained in the bye- laws of any such society, the committee of management shall be elected by a general body of members of the society and all other committees authorised authorised by or under the bye-laws may be constituted by electing or appointing persons from among the persons who are members of the committee of management, and all such Page 14 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT committees shall be sub-committee of the committee of management , and shall be subordinate to it:

Provided that it shall be lawful for the State Government,-

(a) to nominate its representatives on a Committee of any such society under Section 80, or

(b) to nominate the first Committee of management of any such society where the bye-laws of such society so provide.

[Provided further that it shall be lawful for any body or authority to nominate its representative on a Committee of such society where the bye-laws of such society so provide.] [(4) The election of the Managing Committee shall be conducted before the expiry of its term so as to ensure that the newly elected members of the Managing Committee assumes office immediately on the expiry of the term of office of the members of the outgoing Managing Committee.] 145F. Disqualification for membership: (1) A person shall be disqualified for being elected, as, and for being a member of the committee of any specified society-

(a) if he is a salaried employee of any society (other than a society of employees themselves) or holds any office of profit under any society, except when he holds or is appointed to the office of a managing Director or any other office under the society declared by the State Government by general or special order not to disqualify its holder;

(b) if he has been convicted of an offence punishable under Section 153-A or section 171-E or Section 171-F or sub-section (2) or sub-section (3) of Section 505 of the Indian Penal Code, 1860 (XLV of 1860), or under Section 145-R or clause(a) of sub-section (2) of Section 145-S of this Act, unless a period of six years has elapsed since the date of his conviction;

(c) if he has been convicted by a Court in India for any offence and sentenced to imprisonment for not less than two years, unless a period of five years has elapsed since his release;

(d) if he is found guilty of a corrupt practice under this Chapter by the State Government unless a period of six years has elapsed since the date on Page 15 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT which the decision of the State Government takes effect;

(e) if he is also disqualified by or under any other provision of this Act. [(1-A) (I) (a) No member of a society in the Central Co-operative Bank and the State Co-operative Bank shall be eligible to be elected as a member in the committee if he is in default for a period of twelve months in payment of dues to the society.

(b) no person elected as a member of a society in the Central Co-operative Bank and the State Co- operative Bank shall be continued as a member if he is in default for a period exceeding twelve months in payment of dues to the society unless the amount in default with due interest is paid to the society.

(c) no member of a Primary Agricultural Credit C0- operative Society shall be eligible to be elected as a member in the committee of the State Co-operative Bank or a Central Co-operative Bank if the society is in default in payment of dues to the co-operative bank unless the default with due interest is paid to the co-operative bank;

(d) no member of a non-credit society who is a member in the committee of a Central Co-operative Bank or the State Co-operative Bank shall be continued as such member if the society commits default for a period exceeding 90 days in payment of dues to the bank.

(ii) The above provisions shall be in addition to and not in derogation of any other provisions for disqualification contained in this Act.] (2) Any salaried employee of a society who was as member of the Committee of a specified society immediately before the commencement of the Gujarat Co-operative Societies (Amendment) Act, 1981 ( 6 of 1981), shall not be disqualified, and he deemed never to have been disqualified, under clause (a) of sub-section (1), if he was at that time holding any office saved from disqualification under the said clause(a) and shall continue to be such member for such period or subject to such term and conditions for which or on which he would have otherwise continued as such manner, and anything done or any action taken by such person shall be deemed to be duly done or taken Page 16 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT and the committee shall be deemed to be properly constituted, and such thing done or action taken shall not be called in question in any Court or authority on the ground only that the Committee was not properly constituted or that the person was disqualified to continue as a member.

(3) Notwithstanding anything contained in clause

(b) or (c) of sub-section (1), disqualification under either clause shall not,in the case of a person who on the date of the conviction is a member of any specified society, take effect until three months have elapsed from that date or in within that period as appeal or application for revision is brought in respect of the conviction or the sentence until that appeal or application is disposed of by the Court."

6.6 Rule 32 of the Gujarat Co-operative Societies Rules, 1965, reads as under:

"32. Qualification for the member of the Committee:- (1) Every member of a society who is entitled to vote shall be eligible for appointment as a member of a committee thereof it-

(a) he is not in default in respect of any loan taken by him for such period as is specified in the bye-

laws , or [(aa) he is not a defaulter in respect of a loan or interest thereon as specified in sub-sec. (2) of Sec.27 of the Act, or]

(b) he has not directly or indirectly any interest in any subsisting contract made with the society or in any property sold or purchased by the society or any other transaction of the society except in any investment made in or any loan taken from the society, or

(d) he is not held responsible under Section 82, or

(e) no order for recovery of costs made against him by a Magistrate under Section 91, or

(f) no order is made against him under Section 93, or

(g) if he is not found guilty of any of the offences under Section 147 or any offence under Section 403 of the Indian Penal Code in respect of the Page 17 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT property of any society.] [(1-A) A member of the committee who incurs any of the disqualifications specified in sub-rule (1) shall vacate the office and if he does not vacate such office, he shall be removed by Registrar as such member:

provided that the Registrar, shall before making such order of removal, give the person concerned an opportunity of being heard.] [(2) Notwithstanding anything contained in sub- rule (1)

(a) in case of societies dispensing with credit, on person who does money lending business shall be eligible for appointment as a member of the managing committee of the society.

(b) a member of a society, who carries on business of the kind carried on by the societies of which he is the member, shall not be eligible to be the member of any committee of that society within the sanction of the Registrar.

(3) Where any person becomes a member of a Committee of a society in contravention of sub-rule (2) he shall be removed from office as a member of such committee by the Registrar.

Provided that the Registrar shall, before making order of removal, give the person concerned an opportunity of being heard.]"

6.7 Bye-law 30 reads as under:

"30. (I) CONSTITUTION OF BOARD OF DIRECTORS:

The Management and affairs of the Bank shall be entrusted to a Board Directors which shall consist of 18 members excluding State Government nominees as under:

(a) Ten Director representing Taluka wise agricultural credit multipurpose and service Co-

operative societies as mentioned below:

01. One Director from such affiliated societies falling under revenue area of the jamnagar taluka.

02. One Director from such affiliated societies falling under revenue area of the Bhanvad taluka.

03. One Director from such affiliated societies falling under revenue area of the Jamjodhpur taluka.

Page 18 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

04. One Director from such affiliated societies falling under revenue area of the Kalvanpur taluka.

05. One Director from such affiliated societies falling under revenue area of the Jamkhambhaliya taluka.

06. One Director from such affiliated societies falling under revenue area of the Kalavad taluka.

07. One Director from such affiliated societies falling under revenue area of the Dhrol taluka.

08. One Director from such affiliated societies falling under revenue area of the Jodia taluka.

09. One Director from such affiliated societies falling under revenue area of the Lalpur taluka.

10. One Director from such affiliated societies falling under revenue area of the Okhamandal taluka.

11. Two Director from all the affiliated societies falling under revenue area of the Jamnagar District. These two thus elected members will function up to New Election.

(b) One Director representing Non-Agricultural Credit and Industrial Societies.

(e) One Director representing members other than Co-operatives, he will function upto new election.

(f) One Nominee of the State Co-operative Bank.

(g) One Director to be nominated by the Registrar.

        XXX              XXXX         XXXX            XXXX
        (X) OVERDUE DEBTOR

(a) Any member of the Central Co-op Bank defaulting in repaying dues of the society for a period of twelve months shall not be eligible to be elected as a Director of the Board.

(b) Any elected member of the Central Co- operative Bank defaulting in repaying the dues of the society for a period of twelve months shall be continued as a director; provided the amount of overdues with interest thereon, has been repaid to the society.

(c) Any member of the primary agricultural Page 19 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT Credit Co-operative Society shall not be eligible to be elected as a director of the Central Co-operative Bank if the society is in default in repaying the dues of the bank provided the amount of overdues with due interest thereon is repaid to the Co-op Bank.

(d) Any member of non-credit society, which is a member of the Central Co-operative Bank shall not continue as a member if the society commits default for over ninety days in repaying the dues of the Bank.

(e) The above provisions shall remain in addition to other disqualifications under the laws, rules and under these Bye-laws and shall not derogation the same."

7 It is the case of the Petitioner that since the Nandasana Juth Sahakari Mandali, a primary agriculture credit society a constituent of the specified society, namely the Jamnagar Bank, was a defaulter, the Petitioner as a Director of that constituency was disqualified to hold the post of the Director on account of the default of the Society.

8 Considering the provisions of Rule 32 r/w Section 27(2) of the Act and Section 145F thereof the Registrar has held that, as an individual member, the Respondent No.4 had no outstanding dues against the Nandasana Juth Society. As a member therefore he was qualified to vote as per Section 27 (2) of the Act r/w 32. He was therefore eligible to be appointed as a member of the Committee. Only if there is a disqualification as a member of the Committee as specified in Rule 32(1) shall vacate office. In the present case, as a member of the Society there is no default and therefore for the default of the Society he cannot be disqualified to hold the office of Director.

Page 20 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT

9 Let us analyse the provisions of the law so reproduced hereinabove.

9.1 As per Section 27 of the Act no person shall exercise a rights as a member of a society until he has made payments to the Society in respect of membership. The person who has committed a default and remains a defaulter shall not be entitled to exercise voting rights of a member of a society till such repayments are made. The word "member" as defined under Section 2(13) of the Act means a person joining in an application for registration of a co-operative society or a person duly admitted to the membership of the society. 9.2 The term "society" in Section 2(19) means a a co- operative society registered under the Act. 9.3 Reading Rule 32 (1) with Section 27 makes it clear that a member of a society i.e. an individual person who has not defaulted in repayments in entitled to be appointed as a member of the committee. He is disqualified to be a member of the committee if he incurs any disqualification under sub- rule (1) of Rule 32.Which means that if a member of a society has defaulted in repayment then he cannot be eligible and/or is disqualified to be a member of the committee. 9.4 Section 74 C of the Act provides that the election of the committees and of the officers by the committee of the societies such the District Central Co-operative Banks,in this case the Jamnagar District Co-operative Bank shall be subject to provisions of Chapter XI-A and shall be conducted in the manner laid down by or under this Chapter. 9.5 Section 145F which is under Chapter XI-A of the Act provides that a person shall be disqualified for being elected as and for being a member of the Committee of any specified society if he is disqualified under any of the provisions of this Page 21 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT Act. (Section 145f(e).) 9.6 A conjoint reading of these provisions would reveal that:

a). A member who has not defaulted in payment of loans is entitled to exercise his right to vote; (Section 27)

b). He will be eligible for appointment as a member of a committee thereof.

c). He shall only be disqualified under the provisions of the Act,meaning thereby he has defaulted in loan repayment.

10 Therefore the individual member who has defaulted would stand disqualified and therefore even if the society of which he is a member has defaulted would itself not make him ineligible to be appointed as he is not in default.

11 Reading the circular which was reproduced by the Division Bench of this Court and it was in that context that Rule 32(1)(f) was interpreted would be beneficial for our reproduction. The same read as under:

"Sr No. VHT/02/K/Liquidate/823/05 Registrar Co-operative Societies, No.10, Dr. Jivraj Mehta Bhavan, Gandhinagar.

Date : 01/06/2005.

In the State of Gujarat, Cooperative sector has made considerable progress in the last 50 years. In the economic and social development of Gujarat, there has been important contribution of Cooperative Societies, more particularly in sectors like, milk, sugar, banking, housing, there has been noticeable functioning of Cooperative Societies. From amongst the societies functioning in cooperative sector, many are inter-connected with one another. Hence, effect of a society in a particular sector is definitely over societies Page 22 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT working in other sectors. For quite some time an atmosphere of mistrust is created in cooperative banking sector and because of that a feeling of doubt is created in the minds of people towards the entire cooperative sector. Therefore, a need is felt to take such immediate steps as to prevent adverse effect on the works of public interest being carried out by cooperative sector. In many of the cases, the elected members of management committee and office bearers of the society are found primarily responsible for this situation. In some cases, it is found that the office bearers themselves are defaulters of their society or of some other society. This is a blow to the basic principle of cooperation and confidence. From various quarters, concerned and demand has been raised that in public interest a defaulter should not be continued as an office bearer of a society so that transparency can be brought in management of societies and a definite example of social and moral responsibilities can be set and a feeling of trust can be created amongst the members and people at large towards the office bearers of the societies. In this situation, in the public interest and for development of cooperative sector and to restore confidence in it, it is considered necessary to make such provision. Provisions for disqualification applicable to defaulters are there in Section 145-(1)(e) of Gujarat Cooperative Societies Act, 1961, Rule 32(1)(a) of the Gujarat Cooperative Societies Rules, 1965 and qua Urban Cooperative Bank in Section 115(c)(2)

(b)(ii). However, absence is felt of a clear provision that a defaulter of any cooperative society in the State cannot be a member of the management committee of other cooperative societies. By making such a provision, an atmosphere of trust and inter-se correlation will be developed amongst societies and moral responsibility of cooperative society and its elected members of management committee will be established towards their members, depositors and public at large. Hence, in the larger public interest, to fulfill the aforesaid purpose a need is felt to pass an order under the powers conferred upon me vide S.160(1) of the Gujarat Cooperative Societies Act, 1961 to all cooperative societies in the State and accordingly I Page 23 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT pass the following order:-

ORDER

1. All cooperative Societies in the State including specified Cooperative Societies will amend their Bye-laws to the effect that a defaulter of any other cooperative society cannot continue to hold office as a member of committee of the society and shall not participate in the election. The same shall be enforced in the election rules.

2. The resolution to amend the Bye-laws as per direction No.1 shall be passed in the Annual / Special General Meeting of the society.

3. All cooperative societies in the State will have to get amendment in the Bye-laws carried out as per this order before 30/9/2005 and shall get it approved by the competent authority.

For the purpose of this order, definition of defaulter is as follows:

(I) For Societies which are engaged in the activity of dispensing credit, any individual member who has defaulted in paying the due amount of the society.

(ii) For societies engaged in business other than dispersing credit, if such society itself is a defaulter of another society, then all the members of such society.

Sd/-

Registrar Cooperative Societies, Gujarat State, Gandhinagar."

11.1 This makes it abundantly clear that as per the definition of defaulter in the bye laws in context of societies which are engaged in the activity of dispensing credit,any individual member who has defaulted in paying the amounts due would incur disqualification.

11.2 In context of the discussion hereinabove no fault can be found even otherwise in the impugned order of the Registrar dated 2/06/2017.

11.3 What is also evident is that the body i.e. the Bank, which is the specified society has accepted the order of the Page 24 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019 C/SCA/11321/2017 CAV JUDGMENT Registrar. This is one more ground on which the present Petition need not be entertained at the hands of a Society not within the constituent whose Director is nominated on the Board.

12 The Respondent No.4 as a member of a society had proved that there was no default on his part towards the loans of the Society. He was eligble to vote and entitled to be a member of the committee of the Bank and therefore for the default of the Nandasana Juth Sahakari Mandali cannot be disqualified and asked to vacate the office.

The petition is accordingly dismissed with no order as to costs. Notice is discharged. Interim relief, stands vacated.

(BIREN VAISHNAV, J) Bimal Page 25 of 25 Downloaded on : Mon Dec 23 20:48:28 IST 2019

Unlock Advanced Research with PRISMAI

Gujarat High Court