Gujarat High Court
Mahasukhlal Nandlal Doshi And Ors. vs State Of Gujarat And Ors. on 25 May, 1993
Equivalent citations: (1994)2GLR1595
JUDGMENT D.G. Karia, J.
1. Both the above writ petitions involve common and identical questions of facts and law and as such they are heard together and are being disposed of by this common judgment.
Special Civil Application No. 2467 of 1984
2. The petitioners of this writ petition were the original and the only members of the Shanti-sadan Co-operative Housing Society Limited, which was duly registered under the provisions of the Gujarat Cooperative Societies Act, 1961. The petitioners purchased the land bearing Survey No. 1805 admeasuring 5 Acres and 17 Gunthas, situated at Surendranagar, for the purpose of constructing the residential blocks for Rs. 12,000/- by a registered sale deed in the name of the said society on May 31, 1961. The petitioners, without raising any amount of loan from any Bank, contributed for the consideration of purchase of the land. Each of the petitioners held the share certificate in respect of the housing society. The said land was an agricultural land before it was purchased by the petitioners and thereafter it was converted into non-agricultural purpose. The same land was transferred in the name of the society and the entry to that effect was recorded in the relevant register maintained in the office of the Assistant District Registrar, Co-operative Societies, Surendranagar, respondent No. 3 herein. It is the case of the petitioners that the land revenue as well as the educational cess in respect of the land of the society was paid regularly from time to time to the concerned authorities.
3. The said land, being at the extreme far from the then developing town of Surendranagar, could not be developed for a considerable time for the reasons that no water facilities nor electricity nor road facilities were available in the nearby or surrounding area of the land of the society. According to the petitioners, the primary necessities of the livelihood were even not available in the nearby area of the society and as such it took time for its development.
4. By order dated October 23, 1972, the third respondent issued interim order of liquidation of the Shanti-sadan Co-operative Housing Society Limited on the ground that the working of the society had not commenced, in view of the provisions of Section 107(1)(c) of the Gujarat Co-operative Housing Societies Act, 1961 (hereinafter referred to as the "said Act of 1961"). The third respondent also appointed the Liquidator in charge of the said society. It is the case of the petitioners that the petitioners submitted applications to the respondents Nos. 2 and 3 as well as to the Liquidator of the said society on 7-11-1975, 27-1-1976, 8-5-1976 and also on 26-5-1976 with a request that the said society be revived in the interest of the members of the petitioners and to hand over the charge and the record of the said society to the petitioner-members. It is not in dispute that the Liquidator had never called any meeting of the members of the said society at any point of time. In the case of the petitioners, the Liquidator could not approve the lay-out plan of the society on account of non-finalisation of the Town Planning Scheme that was introduced in the city of Surendranagar and as such the Liquidator could not execute the registered deeds in favour of the members of the society in respect of their respective plots. The thud respondent by his order dated June 30, 1981, passed the order under Section 20 of the said Act of 1961, cancelling the registration of the society. The petitioners have challenged the validity and legality of the said order dated June 30, 1981 at Annexure "A" to the petition. The petitioners have also sought the appropriate writ or direction directing the third respondent to reconstruct the petitioner-society under Section 19 of the said Act of 1961.
Special Civil Application No. 2577 of 1983
5. The petitioners of this Special Civil Application purchased the land bearing Survey No. 2003 admeasuring 3 Acres and 23 Gunthas by a registered sale-deed in the name of Motinagar Co-op. Housing Society Limited by a registered sale document on April 17, 1961. The petitioners, without raising any amount of loan, purchased the land from their own independent sources for the purpose of constructing residential premises for their occupations. 1 he said society was duly formed under the provisions of the Gujarat Co-operative Societies Act, 1961. The said land was also converted into non-agricultural land after it is purchased by the petitioners. The petitioners made an application for transferring the land in the name of the society on May 7, 1965, and accordingly it was mutated in favour and name of the said society.
6. By order dated October 29, 1969, the said Motinagar Co-operative Housing Society Limited was brought under liquidation under Section 107(1)(c) of the said Act of 1961 on the ground that the business of the said society had not commenced and the Liquidator of the society was appointed. It is the case of the petitioners that the Liquidator submitted his report regarding the affairs of the society to the respondent No. 3 and the respondent No. 3, by the order dated December 30, 1978 cancelled the registration of the society. The petitioners have challenged the validity and legality of the impugned order dated December 30, 1978 passed by the third respondent, whereby the registration of the petitioner-society was cancelled. The petitioners have also prayed for consequential reliefs.
7. Mr. Gaurang Bhatt, the learned Advocate for the petitioners, in both the above petitions, has raised the following points:
(1) Before passing the impugned order of cancelling the registration of the society under Section 107(1)(c) of the said Act of 1961, no heating was afforded to the petitioner-societies or any of its members and as such the impugned order being in contravention of principles of natural justice is illegal and liable to be quashed.
(2) The petitioner-societies or any of their members were not offered any opportunity of being heard in the matter before passing the final order, as provided in Sub-section (3) of Section 107 of the said Act of 1961.
(3) Interim order is not a speaking order and as such it is vitiated by non-application of mind, violating principles of natural justice.
(4) The impugned order is passed by the Assistant District Registrar who is not competent to pass the order of winding up of the society, and on this ground too the impugned order is bad in law and liable to be set aside.
8. Mr. M.R. Raval, the learned Assistant Government Pleader, appearing for the respondents, contended that the interim order of liquidation was passed on September 26, 1968 and prior thereto show cause notice under Section 107(2) of the said Act of 1961 was issued to the petitioners and thereafter the final order of liquidation was passed. Mr. Raval submitted that the impugned order is just and proper and there was no violation of principles of natural justice. Mr. Raval also submitted that no explicit provision of hearing is made under Section 107 of the said Act of 1961 before passing the order of winding up of the society and it was, therefore, proper for the respondent No. 3 not to give any opportunity of hearing to the petitioners.
9. In order to appreciate the rival contentions of the parties, it would be necessary to scan the relevant provisions of the said Act of 1961. Section 107 in Chapter X relating to liquidation, of the said Act of 1961 runs as under:
107. Winding up - (1) If the Registrar,-
(a) after an inquiry has been held under Section 86, or an inspection has been made under Section 87, or on the report of the auditor auditing the accounts of the society, or
(b) on receipt of an application made upon a resolution carried by three-fourths of the members of a society present at a special general meeting called for the purpose, or
(c) of his own motion, in the case of a society which-
(i) has not commenced working, or
(ii) has ceased working, or
(iii) possesses shares of members' deposits not exceeding five hundred rupees, or
(iv) has ceased to comply with any conditions as to registration and management in this Act or the Rules or the bye-laws, or
(v) has failed to comply with any directions issued under Sub-section (1) of Section 160 or such directions as modified under Sub-section (2) of that section, is of the opinion that a society ought to be wound up, he may make an interim order directing it to be wound up.
(2) Where an interim order is made on a ground specified in Clause (a) or Sub-clause (iv) of Clause (c) of Sub-section (I) a copy thereof shall be communicated, in the prescribed manner, to the society calling upon it to submit its explanation to the Registrar within a month from the date of the issue of such order.
(3) The Registrar, after giving an opportunity to the society of being heard shall make a final order, vacating or confirming the interim order.
10. It is true that there is no provision of giving any opportunity of hearing before passing the order under Section 107 of the said Act of 1961. Chapter X of the said Act contains the material provisions around which the controversy centers in the proceedings of the aforesaid two petitions. Section 108 of the said Act of 1961 provides as under:
108 Appointment of Liquidator: (1) When an interim or final order is made under Section 107 for the winding up of a society, the Registrar may, in accordance with the rules, appoint a person to be the liquidator of the society, and fix his remuneration. (2) Where an interim order is made the officers of the society shall hand over to the liquidator the custody and control of all the property, effects and actionable claims to which the society is or appears to be entitled, and of all books, records and another documents pertaining to the business of the society and, shall have no access to any of them.
(3) When a final order is made confirming the interim order, the officers of the society:
(a) shall hand over to the liquidator the custody and control of any property, effects and actionable claims and any books, records, and other documents pertaining to the business of the society, which for any reason are not handed over to the liquidator under Sub-section (2) at the time when an interim order was made.
(b) shall vacate their offices and while winding up order remains in force the general body of the society shall not exercise any powers.
(4) The liquidator shall, subject to the general control of the Registrar, exercise all or any of the powers mentioned in Section 110. The Registrar may remove him from his office and appoint another in his place without arising any reason.
(5) The whole of the assets of the society shall on the appointment of the liquidator vest in him and notwithstanding anything contained in any law for the time being in force, if any immovable property is held by him on behalf of the society, the title over the land shall be complete as soon as the mutation of the name of his office is effected, and no Court shall question the title on the ground of dispossession, want of possession or physical delivery of possession.
(6) In the event of the interim order being vacated, the liquidator shall hand over the property, effects, actionable claims, books, records and other documents of the society to the officers who had delivered the same to him. The acts done, and the proceedings taken by the liquidator, shall be binding on the society, and such proceedings shall, after the interim order has been vacated under Section 107 be continued by the officers of the society.
11. The above-mentioned provisions of the Act do not provide for the applicability or otherwise of the rule of audi alteram partem at the stage of making an interim order under Section 107(1) of the said Act of 1961. In this connection, Mr. Bhatt relied upon the judgment of this Court (Coram: P.D. Desai, J. (as he then was) and G.T. Nanavati, J.) dated 26th/27th/28th December, 1979, rendered in Special Civil Application No. 2336 of 1979, dealing with and disposing of the same questions that are raised in the present petitions. It is a settled rule of construction of statutes that at all times and under all circumstances, it is permissible to have regard to the state of things existing at the time when the statute was passed and to the evils, which, as appears from the provisions, it was designed to remedy. Section 107 deals with the winding up of the society in the circumstances enumerated therein. The Registrar, on an inquiry under Section 86 or on an inspection under Section 87 or on the report of the auditor auditing the accounts of the society, or on receipt of an application made upon a resolution carried by three-fourths of the members of a society present at a special general meeting called for the purpose or in case of the society which has not commenced working or has ceased working or possesses deposits not exceeding five hundred rupees, may order for winding up of the society. The Registrar may also pass such order in the event of failure of the society to comply with any direction under Sub-section (1) of Section 160 or such directions as modified under Sub-section (2) of that section, or if the Registrar is of the opinion that the society is to be wound up, he may make an interim order directing it to be wound up. Sub-section (2) of Section 107 provides that where an interim order is made on a ground specified in Clause (a) or Sub-clause (iv) of Clause (c) of Sub-section (1) a copy thereof shall be communicated, in the prescribed manner, to the society calling upon it to submit its explanation to the Registrar within a month from the date of the issue of such order. Sub-section (3) of Section 107 contemplates that the Registrar, after giving an opportunity to the society of being heard shall make a final order, vacating or confirming the interim order. Rules of natural justice bear upon construction where a statute is silent. When civil consequences are involved, it would be proper and fair on the part of the authority to give an opportunity of hearing to the party who is going to be affected by the order that is going to be passed. Natural justice is a concept which has succeeded in keeping the arbitrary action within limits and preserving the rule of law. The procedure of affording hearing is as important as decision on merits. In construing Section 107(1) of the said Act in a just and proper way, it would be just and fair on the part of the Registrar to give an opportunity of hearing to the members of the society before passing the interim order, as contemplated under Section 107 of the Act. The mechanism of winding up laid down in Section 107 contemplates two essential steps to be taken; first, an interim order directing winding up being made, and, secondly, a final order being made vacating or confirming the interim order. As stated herein-above, the law is silent on the question as to whether the concerned society has to be given an opportunity of being heard before an interim order is made. It would be evident on a bare reading of Section 107 that it is not permissible to make a final winding up order unless an interim order is first made. The conditions for winding up of a society arc incorporated in Clauses (a), (b) and (c) of Sub-section (1) of Section 107 said Act of 1961. In the instant case, the condition which is sought to be invoked is the society having not commenced its working. It is not in dispute that before passing the interim order as to winding up by the third respondent, no opportunity as to hearing was given to the petitioner -societies or to any of their members, nor any explanation was called for by the Assistant Registrar for not having commenced the working of the societies. What is contended by Mr. Raval is that it was not incumbent upon the third respondent to provide any hearing before passing the interim order of winding up of the petitioner-societies. It is not the case of the respondents that there existed any compulsive necessity of the situation for passing the interim order of winding up of the society. As is urged by Mr. Gaurang Bhatt, the learned Advocate appearing for the petitioner-societies that there were no facilities as to water, electricity, road, etc.. at the relevant time and on account of undeveloped situation, the petitioners could not make any attempt to construct the residential houses on the land purchased by them for the purpose. If the petitioners were given an opportunity of hearing before passing the interim order of winding up, it is likely that the petitioners would have explained these difficulties on account of which they were unable to carry out or commence the construction of the residential houses on the lands in question and as a result of which it would not have been necessary for the third respondent to pass the order of interim nature winding up the society. It is also the grievance of the petitioners that no speaking order setting out the grounds for the exercise of the powers under Section 107 and the reasons which necessitated to pass such interim order is made and as such the impugned orders become vulnerable. It is an admitted position that no such speaking order was passed by the respondent No. 3. It is only when such an order is passed that it would be possible to ascertain whether the power under Section 107 of the said Act of 1961 has been exercised within the terms of the statute or whether it is ultra vires as being vitiated by any of the errors. In view of the facts and circumstances of the case, the third respondent should have given an opportunity to the petitioners of being heard in the matter before passing the interim order of winding up of societies. In my opinion, the impugned orders are, therefore, bad in law and violative of the principles of natural justice.
12. Rule 46 of the Gajarat Co-operative Societies Rules, 1965 provides that a copy of an interim order made on a ground specified in Clause (a) or Sub-clause (iv) of Clause (c) of Sub-section (1) of Section 107 shall be communicated by the registered post. It is the grievance of the petitioners that no such interim order was communicated to the petitioner-society by registered post. Respondents have not filed any affidavit-in-reply controverting this fact. It is also the grievance of the petitioners that the Liquidator appointed for the society did not convene any general meeting of the members of the society at any point of time. Mr. Gaurang Bhatt placed reliance on Sub-rule (6) of Rule 48 of the Gujarat Cooperative Societies Rules, 1965, which reads as under:
(6) At the conclusion of the liquidation procedure, a general meeting of the members of the society shall be called at which the Liquidator shall summarise his proceedings, point out the causes of the failure of the society, and report what sum, if any, remains in the possession after meeting all the liabilities of the society as determined by him.
13. There is force in the submission of Mr. Bhatt for the reasons that it is not controverted nor shown in any way by the learned Assistant Government Pleader appearing for the respondents, that the copy of the interim order was ever communicated to the petitioner-societies. It is also not shown that the Liquidator had held a general meeting of the members of the society at any time. Therefore, the aforesaid two Rules are clearly violated.
14. According to the petitioners, no notice under Sub-section (2) of Section 107 of the said Act of 1961 was issued to the petitioner-societies. In absence of such notice, it is obvious that the petitioners could not explain the circumstances beyond their control for commencing work of the society in constructing the houses for their members. The impugned orders are also liable to be quashed on this ground too.
15. In the above view of the matter, it has to be held that the interim order of winding up of the petitioner-societies made by the third respondent is violative of the principles of natural justice. There is also breach of the statutory provisions of Section 107(3) of the said Act of 1961, inasmuch as the Registrar has to give an opportunity to the petitioner-societies of being heard before making a final order vacating or confirming the interim order. The petitions are required to be allowed on these two grounds and as such it is not necessary to deal with the contention of Mr. Bhatt to the effect that the impugned orders were passed by the Assistant District Registrar who was not the competent authority to pass the orders. In any view of the matter, the impugned orders as to winding up of the petitioner-societies are required to be quashed and are hereby quashed. The consequential orders of canceling the registration of the societies thus become a nullity.la the result, the petitions are allowed with costs. The impugned orders of winding up of the societies are quashed and set aside. Rule made absolute accordingly, in each of the petitions.