Punjab-Haryana High Court
Harmohinder Singh, M.L.A. And Director ... vs State Of Punjab Through Financial ... on 17 November, 1997
Equivalent citations: (1998)119PLR733
Author: Balwant Rai
Bench: Balwant Rai
JUDGMENT V.K. Jhanji, J.
1. In this petition, challenge is to order No. 26/192/97C-2(3)/13796 dated 22.9.1997 (Annexures P-2) whereby respondent No. 4, Jagdish Singh Walia is sought to be appointed as Chairman of the Board of Directors of the Punjab State Co-operative Supply and Marketing Federation Limited (hereinafter referred to as the Markfed). Challenge is also to order No. 26/173/96-CII(3)/13900 dated 22.9.1997 (Annexure P-3) vide which services of respondent No.5, S.S. Brar, have been placed at the disposal of Board of Directors of Markfed for appointing him as Managing Director of the Markfed.
2. At the threshold, it has been contended by counsel for the petitioners that removal of Amarjit Singh Samra as Chairman of the Board of Directors of Markfed and in consequence thereof appointment of respondent No. 4 as Chairman of Markfed is subject-matter of Civil Writ Petition No. 14053 of 1997 and therefore, the parties may be relegated to agitate the appointment of respondent No. 4 as Chairman, in the said writ petition. In view of this contention, we pass no order as regards Order No. 26/192/97C-2(3)/13796 dated 22.9.1997 whereby respondent No. 4 has been appointed as Chairman of Board of Directors by the Government in exercise of powers conferred Under Section 26(2)(a) of the Punjab State Co-operative Societies Act, 1961 (hereinafter referred to as 1961 Act).
3. As regards Order No. 26/173/96-CII(3)/1390 dated 22.9-1997 vide which services of respondent No. 5 have been placed at the disposal of Board of Directors, Markfed, for appointing him as Managing Director of the Markfed, challenge is on the ground that Under Section 26(2) of the 1961 Act, the State has the power to appoint either the Managing Director or the Chairman of the Board of Directors. It cannot appoint both. It has been contended that since S.S. Brar was earlier appointed as Managing Director, Markfed, in the year 1996, the State could not appoint respondent No. 4 as Chairman. It has also been contended that once S.S. Brar was nominated as Managing Director by the Government in exercise of powers Under Section 26(2) of the 1961 Act, no second order placing his services at the disposal of Board of Directors of Markfed, could have been passed.
4. On notice, three sets of written statement have been filed; one by respondents 1 and 2; second by respondent No. 3 and third by respondent No. 4. Written statement on behalf of respondent No. 3 has been filed by A.S. Samra whose removal and consequent appointment of respondent No. 4 is already under challenge in C.W.P. No. 14053 of 1997. A.S. Samra in fact has admitted the material averments made by the writ petitioners. However, other respondents, namely, respondents 1 and 2 and respondent No. 4 have defended the action of the Government in placing the services of respondent No. 5 at the disposal of Markfed for being appointed as Managing Director.
5. On hearing the learned counsel for the parties and going through the record, we are of the view that order dated 22.9.1997 placing the services of respondent No. 5 at the disposal of Markfed for being appointed as Managing Director is in order and calls for no interference. Bye-Laws of the Markfed provide that the management of the affairs of the Markfed shall vest in a Board of Directors which shall be constituted as under :-
(a) Three nominees of the Government;
(b) A nominee of the Apex Co-operative Bank;
(c) Twelve representatives of member societies to be elected on zonal basis by dividing the area of operation of the Federation into 12 zones as under :
(i) Nine representatives from primary societies.
(ii) Three representatives from Marketing/Distt. whole-sale societies and other central societies.
(d) Managing Director.
(e) Registrar Co-op. Societies Pb. or his nominee."
It is not in dispute that election of 12 representatives of member societies to be elected on zonal basis was held on 21.7.1995. 11 Directors including 6 petitioners were elected. The election of one representative did not take place. On 18.3.1996, elected members of the Board of Directors unanimously elected A.S. Samra as Chairman of the Board of Directors. Petitioners have alleged that elections in the State of Punjab were held in January, 1997 and the new Government took over in February, 1997, who in order to put their own men on various posts in autonomous bodies/co-operative societies/federation etc., including Markfed, sought to remove A.S. Samra from the chairmanship and to appoint its own man, namely, Jagdish Singh Walia as Chairman of the Markfed. To achieve this, firstly a show-cause notice was issued to A.S. Samra as to why he be not removed from the chairmanship, as also from the membership of the Board of Directors. He submitted his reply to the show-chause notice and requested for supply of relevant documents. Petitioners have alleged that neither the documents were supplied nor any effective opportunity was granted to A.S. Samra, and vide order dated 4.9.1997 Registrar, Co-operative Societies, Punjab, removed . A.S. Samra from the membership/Chairmanship of the Board of Directors in exercise of powers Under Section 27(1) of the 1961 Act. He, however, was allowed to continue on the post of Chairman for 15 days with a liberty to avail his remedy in appeal available under the provisions of the 1961 Act. A.S. Samra challenged the order removing him from the post by way of filing C.W.P. No. 14053 of 1997 and by an interim order dated 22.9,1997, he was allowed to continue as Chairman till further orders. It is further the case of petitioners that the writ petition later on was admitted for regular hearing. We are informed that now the writ petition is listed on the Regular Board of N.K. Kapoor, J. Petitioners have alleged that in order to make Civil Writ Petition No. 14053 of 1997 as infructuous, Government passed two orders on 22.9.1997; one being No. 267192/97C-2(3)/13796 (Annexure P-2) vide which respondent No. 4, Jagdish Singh Walia, was nominated as member of the Board of Directors and vide the same order he was appointed as Chairman of the Board of Directors in exercise of powers Under Section 26(2)(a) of the 1971 Act; and second order being No. 26/173/96-CII(3)/33900 (Annexure P-3) issued in modification of order, Annexure P-2, whereby services of respondent No. 5, S.S. Brar, who vide earlier order dated 9.5,996 had been nominated as member of the Board of Directors and appointed as Managing Director, were placed at the disposal of Board of Directors for appointing him as Managing Director. Since counsel for the petitioners has given up challenge to the appointment of respondent No. 4 as Chairman so as to challenge the same in C.W.P, No. 14053 of 1997, the only challenge left in this writ petition is to Order No. 26/173/96-CII(3)/13900 dated 22.9.1997 (Annexure P3) whereby services of S.S. Brar, respondent No. 5, have been placed at the disposal of the Board of Directors for appointing him as Managing Director of the Markfed.
6. The question thus, to be determined in this case is whether order at Annexure P-3 placing the services of S.S. Brar, respondent No. 5, at the disposal of the Board of Directors for appointing him as Managing Director, Markfed, is vitiated on account of the fact that he had already been nominated and appointed as Managing Director by the Government in exercise of its power Under Section 26(2)(b) of the 1961 Act.
7. It is the admitted case of the parties that the Managing Director can either be appointed Under Section 26(2) or under Rule 2.1 of the Punjab State Co-operative Supply and Marketing Federation Employees (Common Cadre) Services Rules, 1990. Section 26(2), (2A), (2B) and (3) which is relevant for the decision of this case reads as under :-
"(2) Notwithstanding anything contained in Sub-section (1),
(a) where the Government have subscribed to the share capital of a co-operative society or has guaranteed the repayment of the principal of and payment of interest on debentures issued for loans raised by a co-operative society, the Government or any person authorised by it in this behalf shall have the right to nominate on the committee such number of persons, not exceeding three or one-third of the total number of members thereof, whichever is less as the Government may determine:
Provided that where the Government have subscribed to the share capital of a co-operative society, to the extent of twenty lacs of rupees or more, the Government may, notwithstanding anything contained in the bye-laws of the society, -
(a) appoint one of the members nominated in the aforesaid manner as Chairman of the committee of such society; or
(b) nominate another member in addition to those nominated in the aforesaid manner and appoint him as Managing Director :
Provided further that no person shall be appointed to act as Managing Director unless he is a member of the Indian Administrative Service, Punjab Civil Service (Executive Branch) or a Deputy Registrar, a Joint Registrar or an Additional Registrar, Co-operative Societies.
(b) where the Industrial Finance Corporation, the State Finance Corporation or any other financing institution notified in this behalf by the Government has provided finance to a co-operative society, the Industrial Finance Corporation, State Finance Corporation or other financing institution as the case may be, shall have the right to nominate one person on the committee.
(2A) Where the Government appoints a Chairman or Managing Director under the proviso to Clause (a) of Sub-section (2), the Chairman or Managing Director, if any, as the case may be, holding office immediately before such appointment shall cease to hold office on such appointment.
(2B) The terms and conditions of service of the Managing Director or Chairman, as the case may be, appointed by the Government shall be such as may be determined by the Government and the remuneration payable to the Managing Director or Chairman, as the case may be, shall be paid out of the funds of the Co-operative Society.
(3) A person nominated under Sub-section (2) shall hold office during the pleasure of the Government or the Corporation or other financing institution, as the case may be."
From a reading of the above, it is apparent that where the Government has subscribed to the share capital of a co-operative society, it can nominate 3 Director or l/3rd, whichever is less, on the Board. Proviso (a) and (b) provides that in case the Government has subscribed to the share capital of a co-operative society to the extent of Rs. 20 lacs or more, then the government can appoint one of the nominated person as Chairman. A further power has been given to nominate another Director and appoint him as Managing Director provided he is an IAS, PCS or not below the rank of Deputy Registrar. However, under proviso (a) or (b), the Government can either appoint a Chairman or Managing Director. It cannot appoint both.
8. Markfed in exercise of the powers conferred by Sub-section (2) of Section 84-A of the 1961 Act, with the prior approval of the Registrar, Co-operative Societies, has made the rules regarding recruitment and conditions of service of the employees of the Federation. The rules are called as the Punjab State Co-operative Supply and Marketing Federation Employees (Common Cadre) Service Rules, 1990. Rule 2.1 of the Common Cadre Rules is as under :-
"2.1. Appointments to various posts shall be made as under :
(a) By Director recruitment;
(b) By promotion;
(c) By transfer and/or on deputation from other Institutions/Govt. Department and the percentage of mode of recruitment shall be as provided for in Annexure-II.
XXX XXX XXX
ANNEXURE-II.
DETAILS OF CADRE STRENGTH, PAY SCALES, AGE LIMIT
AND MODE OF RECRUITMENT.
Sr. Nomen- No.of Mode of Recruitment Remarks.
No. clature posts percentage of posts
of posts and qualifications.
By By By
direct transfer promo-
recruit- and on tion.
ment. deputation.
1 2 3 6 7 8 9
GROUP'A'
1. Managing 1 - - - On deputation
Director from Pb. Govt.
Bye-law 23(b) of the Bye-laws of the Markfed reads as under :-
" 23. The powers and duties of the Board of Directors shall be -(b) to appoint the Managing Director and such other staff if considered necessary, of the Federation and to determine their conditions of service including qualifications, recruitment, emoluments, incentives, punishment, retirement etc., subject to the approval of the Registrar."
From the conjoint reading of Section 26(2)(a) and (b), Rule 2.1. of the Common Cadre Rules and Bye-law 23(b), it is clear that in case the Government opts not to nominate and appoint a Chairman but exercises its power in nominating and appointing a Chairman, the Board of Directors is empowered to appoint the Managing Director with the prior approval of the Registrar, Co-operative Societies. From sources given in Annexure-II to the Common Cadre Rules. A perusal of Annexure-II would show that the Managing Director has to be a person on deputation from the Punjab Government.
9. In this case, elections of the Board of Directors took place on 21.7.1995 and A.S. Samra was elected as Chairman of the Board on 18.3.1996. Before A.S. Samra came to be elected as Chairman, the State in exercise of its power under provisio (b) to Section 26(2) of the 1961 Act nominated respondent No. 5, S.S. Brar, as member of the Board of Directors and appointed him as Managing Director. Since the State had the power to appoint either the Managing Director or Chairman, it opted to appoint Managing Director, namely, S.S. Brar. A.S. Samra continued to act as Chairman till the State in exercise of its power under provsio (a) to Section 26(2) decided to nominate and appoint respondent No. 4, J.S. Walia, as member of the Board of Directors and Chairman respectively. On appointment of J.S. Walia as Chairman, A.S. Samra ceased to be the Chairman as Sub-section (2-A) of Section 26 provides that where the Government appoints a Chairman under proviso to Clause (a) of Sub-section (2), the Chairman, if any, holding office immediately before such appointment shall cease to hold office on such appointment. Respondent No. 4, J.S. Walia, having been appointed as Chairman, S.S. Brar who had earlier been nominated and appointed as Managing Director, vide order dated 9.5.1996, under proviso (b) to Section 26(2) could not have functioned any longer because the State had the power to appoint either the Chairman or Managing Director. Therefore, by order dated 22.9.1997, Annexure P-3, the State modified earlier order dated 9.5.1996 appointing S.S. Brar as Managing Director in exercise of its power under proviso (b) to Section 26(2) and placed his services at the disposal of Board of Directors for appointment as Managing Director on deputation as provided in Common Cadre Rules. Order, Annexure P-3, thus, is not bad in law but is in accordance with the Common Cadre Rules.
10. At this stage, it deserves to be mentioned that during the pendency of the writ petition. S.S. Brar whose services, vide order dated 22.9.1997, had been placed at the disposal of the Board of Directors for appointment as Managing Director, has been recalled to his parent department and in his place, vide order bearing Endst. No. 26/173/96-II(3)/16277 dated 10.11.1997, services of one Gurinderjit Singh Sandhu have been placed at the disposal of Board of Directors for appointment as Managing Director on deputation. In this regard short affidavit of Sh. A.S. Bains, Deputy Secretary, Department of Co-operation, Punjab, has been filed, which reads as under :-
" 2. That vide orders bearing Endst. No. 26/173/96-CII(3)/16277 dated 1.11.1997 the services of Shri Gurindcrjit Singh Sandhu IAS, has been placed at the disposal of the Board of Directors of the MARKFED in pursuance of the orders dated 7.11.1997 issued by the Chief Secretary to Government of Punjab.
3. That vide orders dated 10.11.1997 Shri Gurinderjit Singh Sandhu, IAS, has been placed at the disposal of the Board of Directors of the MARKFED on deputation for considering his name to appoint him as Managing Director, Punjab State Co-operative Supply and Marketing Federation (MARKFED) by the Board of Directors of the MARKFED.
4. That the orders dated 10.11.1997 be read to have been issued as mentioned in para No. 3 above."
Since we are of the view that order, Annexure P-3, is in accordance with Common Cadre Rules, order dated 10.11.1997 placing the services of G.S. Sandhu at the disposal of Board of Directors for considering his name to appoint him as Managing Director also being in accordance with the Common Cadre Rules, too cannot be questioned.
11. It is next contended by the learned counsel for the petitioners that order, Annexure P-3, placing the services of S.S. Brar at the disposal of Board of Directors is against bye-law 26 of the Bye-laws which provides that the Managing Director of the Markfed shall be appointed by the Government, According to the learned counsel, the Government can appoint Managing Director only in exercise of its power Under Section 26(2)(b) and has no jurisdiction to send a person on deputation for considering him to be appointed as Managing Director. We find no merit in this contention as well. After the nomination and appointment of J.S. Walia as Chairman of Markfed, Government vide order dated 22.9.1997 (Annexure P3) placed the services of S.S. Brar at the disposal of Board of Directors for being appointed on deputation, meaning thereby that it withdrew S.S. Brar's nomination and appointment as Managing Director which had earlier been done by order dated 9.5.1996 in exercise of power Under Section 26(2)(b) of the 1961 Act. Vide order, Annexure P-3, he thus, ceased to be a Government nominee for the purposes of Section 26(2)(b) of the 1961 Act. By passing order, Annexure P-3, the Government has exercised its power as given to it under Rule 2.1. read with Appendix-II of the Common Cadre Rules and bye-law 26 of the Bye-laws of the Markfed and therefore, the order is not against bye-law 26 of the Bye-laws, as alleged.
12. It is then contended by the learned counsel for petitioners that G.S. Sandhu cannot function as Managing Director till such time the Board of Directors considers his name and appoints him as such with the prior approval of the Registrar, Co-operative Societies. Counsel for respondents are not disputing to what has been contended by counsel for the petitioners, but it has been contended by Mr. S.K. Bhanot, DAG Punjab, that in case G.S. Sandhu is not allowed to act as Managing Director till such time a decision in this regard is taken by the Board of Directors, the working of the Markfed would come to a stand-still. He has contended that the Chairman being not a member of Indian Administrative Service (IAS), or a Joint Registrar or an Additional Registrar, Co-operative Societies, the Managing Director alone can act as Principal Executive Officer. Reference in this regard has been made to Rules 80-B and 80-C of the Punjab Co-operative Societies Rules, 1963, which read as under:-
"80-B. The Managing Director of a Co-operative Society shall be its Principal Executive Engineer and the employees of the society shall exercise their powers and perform their duties under his superintendence and control. The Managing Director shall exercise his power and perform his duties under the over-all supervision and control of the Committee.
80-C. Notwithstanding anything contained in Rule 80-B when a chairman has been appointed in pursuance of proviso (a) to Clause (a) of Sub-section (2) of Section 26 of the Act and when such Chairman is a member of the Indian Administrative Service or a Joint Registrar, or an Additional Registrar, Co-operative Societies and is also working whole time in such a capacity, all powers of the Principal Executive Officer by whatever name called, of a co-operative society will vest in the Chairman. All other employees of the society will exercise their powers and perform their duties under his superintendence and control. The Chairman, with the prior approval of the Registrar may delegate any of his powers to any employees of the society."
A perusal of the rule as quoted above, shows that the Managing Director is the Principal Executive Officer and has been empowered to exercise his powers and perform his duties under the over-all supervision and control of the Board of Directors. However, in case the State has appointed a Chairman in exercise of its power Under Section 26(2)(a) of the 1961 Act and such person happens to be a member of the Indian Administrative Service or a Joint Registrar or an Additional Registrar, Co-operative Societies, then the power of Principal Executive Officer has to vest in him. In this case, respondent No. 4 J.S. Walia, who has been nominated and appointed as Director and Chairman by the State in exercise of its power Under Section 26(2)(a), is not a member of Indian Administrative Service or a Joint Registrar or an Additional Registrar, Co-operative Societies. He cannot act as Principal Executive Officer and so, Mr. Bhanot is right in contending that if G.S. Sandhu is not allowed to act as Managing Director till a decision in this regard is taken by the Board of Directors, the working of the Markfed would come to a stand-still. In this situation, we direct the Board of Directors of the Markfed to take a final decision in regard to appointment of G.S. Sandhu as Managing Director within one month from today, with the prior approval of the Registrar, Co-operative Societies. Till such time a decision is taken by the Board of Directors, G.S. Sandhu shall continue to act as Managing Director.
13. Resultantly, no ground to quash order. Annexure P-3, or subsequent order dated 10.11.1997 placing the services of G.S. Sandhu at the disposal of Board of Directors for being appointed as Managing Director on deputation, is made out. The writ petition fails. It is accordingly dismissed.