Gujarat High Court
Gujarat vs State on 13 June, 2011
Author: S.R.Brahmbhatt
Bench: S.R.Brahmbhatt
Gujarat High Court Case Information System
Print
SCA/223/2011 60/ 60 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 223 of 2011
With
SPECIAL
CIVIL APPLICATION No. 2177 of 2011
For
Approval and Signature:
HONOURABLE
MR.JUSTICE S.R.BRAHMBHATT
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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, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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GUJARAT
STATE COOPERATIVE AGRICULTURE & RURAL DEVELOPMENT & 13 -
Petitioners
Versus
STATE
OF GUJARAT THROUGH PRINCIPAL SECRETARY & 6 - Respondents
=================================================
Appearance :
MR
ND NANAVATI with MR.BM MANGUKIYA for Petitioners: 1 - 14.MS BELA A
PRAJAPATI for Petitioners : 1 - 14.MR DEVANG VYAS for Petitioner :
6,
MR TUSHAR MEHTA, LD. AAG with Ms. MANISHA NARSINGHANI, LD AGP
for Respondents : 1 - 3.
NOTICE SERVED BY DS for Respondents : 4 -
5.
None for Respondents : 6 -
7.
=================================================
CORAM
:
HONOURABLE
MR.JUSTICE S.R.BRAHMBHATT
Date
:13/06/2011
CAV
COMMON JUDGMENT:
These
two petitions contain challenge to the nomination
of
Government's representative and nomination of Registrar, Cooperative
Societies, on the board of the Gujarat State Cooperative Agriculture
& Rural Development Bank Limited (herein after referred to as
the "Bank" for the sake of brevity) in exercise of power
conferred upon the State under section 80(1)of the Gujarat
Cooperative Societies Act, 1961 (herein after referred to as the
"Cooperative Societies Act" for the sake of brevity). As
both these petitions are essentially containing same challenge and
their facts are almost identical they were heard together and are
being disposed of by this common judgment & order.
Facts
in brief deserve to be set out as under.
2.1
Special Civil Application No. 223 of 2011 came to be filed by the
Gujarat State Agriculture & Rural Development Bank through its
Managing Director and 13 others who have been elected as members of
the Board of Directors of the Bank. The Bank is registered under the
provisions of the Gujarat Cooperative Societies Act and is
classified to be a Specified Cooperative Society as defined under
section 74 (C) of the Gujarat Cooperative Societies Act. The Board
of Directors of the Bank consist of 17 elected directors, one
director, i.e. nominee of Gujarat State Cooperative Bank Limited,
the Apex Bank and the Registrar of Cooperative Societies, Gujarat
State. Thus total 19 members are forming Board of the Bank. The
terms of Board of Directors of the Bank was coming to an end hence
election of Board of Directors was announced by the City Dy.
Collector, Ahmedabad. The election of the Board of Directors was
held by the City Dy. Collector, Ahmedabad, and the result was
declared on 14/8/2010. The Managing Director of the Bank addressed a
communication dated 15/9/2010 requesting City Dy. Collector to give
consent for holding meeting of newly elected Board of Directors for
electing Chairman & Vice Chairman of the Bank. It is alleged
that for three months no consent was accorded and on December 15,
2010, the meeting was directed to be convened on 5/1/2011. The
Managing Director of the Bank therefore issued agenda notice
indicating that the election for the post of Chairman and Vice
Chairman was to be held on January 05, 2011 at 3.00 pm, in the Board
Room of the Bank. One gentleman called Mr. Ishwarbhai Chaudhari
approached Learned Nominee of the registrar by preferring dispute
under section 96 of the Gujarat Cooperative Societies Act which came
to be marked as Dispute No. 3/2011. The disputant mainly contended
that the agenda notice was required to be issued by the Collector
and as it was not issued by the Collector, calling of the meeting by
Managing Director was unlawful and that for holding election
requisite procedure of calling for nomination, scrutiny of
nominations etc, was not undertaken; and therefore, the process was
assailed as illegal. The application for interim relief was also
filed praying order restraining concerned from holding meeting on
5/1/2011. the Learned Nominee of the registrar issued an ad-interim
order on 4/1/2011 in terms of Prayer-11(A) of the memo of the
application and stayed the said meeting. The petitioners have
averred in the petition that those proceedings are under challenge
in a separate petition and it would not be appropriate to elaborate
on those proceedings on the memo of this petition. The order passed
by Learned Nominee came to be assailed in the Gujarat State
Cooperative Tribunal by the Bank by preferring Revision Application
no 3 of 2011 which came to be allowed. However the judgment allowing
the Revision Application came to be stayed till January 11, 2011.
These proceedings have been challenged before this Court in Special
Civil Application No. 25 of 2011 and 26 of 2011. This Court, in
these two writ petitions, issued direction in its order dated
6/1/2011 and by way of ad-interim relief directed that meeting of
the Board of Directors of the Bank should be convened on 17/1/2011
at 11.00 am in the board room of petitioner no.1 Bank. The agenda
notice to this effect was ordered to be issued to all the concerned
directors and a public notice was also ordered to be issued in the
newspaper, called 'Gujarat Samachar'. A copy of the order dated
6.01.2011 is at Annexure-E to the petition. The petitioners have
alleged in the memo of the petition that as the directors have
allegiance with Indian National Congress, the rival political party
in power made all attempts for stalling the election of Chairman
and vice chairman so as to get time for engineering defection. The
Bank is a Central Bank as defined under sub-section (3) of section
2 of Gujarat Cooperative Societies Act, and as per the amended
provision of sub section (3) of Section 80 of the Act, State has no
authority or power to nominate its representative on the Board. The
petitioners came to know through newspaper reports that the
Government has nominated respondent no. 4 and 5 on the Board of
their Bank hence they preferred this petition on 12/1/2011.
2.2
As it appears from the record, a mentioning was made before the
Division Bench taking up election matters for urgent orders and
accordingly the matter was circulated and the Division Bench passed
order on 13/1/2011 holding that, prima facie the petition was
required to be listed before the single judge of this Court
according to the roster for the time being in force and the office
was directed to examine it and list the matter before the
appropriate bench at the earliest in view of the urgency expressed
by learned counsel for the petitioners. Thus this matter was posted
before learned Single Judge. This Court on 17/1/2011 (Coram: M.D.
Shah, J) passed detailed order holding that once election process
had started the election could not be stayed and it was required to
be held on the same day. The alternative prayer of keeping the votes
cast by nominated members separately was also not accepted. However
it was clarified that whatever transpired during pendency and final
disposal of the petition, would be subject to final outcome of this
petition and the matter was listed for hearing. This order was
assailed by the petitioners in LPA No. 135 of 2011 in SCA NO.223 OF
2011 but the division bench of this Court did not interfere with the
order dated 17.01.2011 as the the learned single judge had clarified
that whatever takes place during pendency and final disposal this
petition was subject to final out come of the petition. The LPA No.
135 of 2011 came to be dismissed on 24.11.2011.
2.3
The second matter, i. e. Special Civil Application No. 2177 of 2011
is filed by one of the elected directors and defeated contestant in
the election to the post of Chairman in the Bank held on 17.01.2011,
challenging respondent no.2's continuation as nominee member of the
Board of Directors of the Bank under the provisions of Cooperative
Societies Act. The petitioner has mainly relied upon the provisions
of section section 80 (3) of the Gujarat Cooperative Societies Act
in resisting continuation of respondent no.2 as member of the Board
of Directors of the Bank. The respondent no.2 is said to have been
acting as member of the Board of Directors of the Bank in view of
provision of Section 80 (1) of the Gujarat Cooperative Societies
Act. That, continuation of respondent no.2 as Member of the Board of
Directors is contrary to the provision of Section 80 (3) of the
Gujarat Cooperative Societies Act as the State has not subscribed to
any share capital and therefore, the Government has no right to
nominate any nominee on the Board of Directors of the Bank and hence
respondent no.2 cannot function as Member of the Board of Directors
of the Bank. The power, even if it is given to the State for
appointment as per the by-law of the Bank then also, same by-law is
to be governed by provisions of Section 80 (3) of the Gujarat
Cooperative Societies Act, and in this view of the matter the
respondent no.2's continuation as Nominee of the State is not
permissible. The petitioner has made almost same allegations as are
made in another cognate matter. This petition was filed on
15/2/2011, as it is stated herein above as both the petitions
contain identical challenges and similar facts they were heard
together and are being disposed of by this common judgment and
order.
3.
A peculiar development occurred during the pendency of the
SCA 223 of 2011 deserves to be noted and recorded as it would have
vital bearing upon the locus of the present petitions which would be
adverted at the appropriate place herein after. The Bank, the first
petitioner in the SCA No. 223 of 2011 sent a letter dated 23/1/2011
to its advocate, informing him that as he was aware that the
election for the post of chairman and vice chairman was concluded on
17.01.2011, and as the bank has decided to accept the order of the
state government appointing two nominees to the board of directors
of the bank, the bank was not interested in pursuing further with
the captioned special civil application and hence their advocate was
requested to withdraw his appearance on behalf of the bank. The bank
also informed the learned advocate that it was in process of filing
a note before the court for withdrawal of the captioned writ
petition on behalf of the Bank. In fact the Bank has vide its
communication dated 24.01.2011 addressed to the Registrar, Gujarat
High Court, indicated in unequivocal language that the petition was
sought to be withdrawn by the Bank as the Bank has accepted order of
nomination of two persons on its Board, and therefore their request
to withdraw from the matter, as there was nothing to argue in the
matter, be accepted. Therefore, an allegation was made that as the
concerned persons got elected, the Managing Director was directed to
withdraw the petition and hence on 28/2/2011 the request was made to
treat the petitioner No. 6 and 10 to be transposed as Respondents.
Learned advocate appearing for them did not objected to it and hence
they are transposed as respondents. The Bank's request for
permitting it to withdraw the petition qua it is also hereby
accepted and the petition is thus treated to have been withdrawn so
far as the Bank is concerned. Now therefore the petition being SCA
223 of 2011 would survive qua only the remaining petitioners barring
those who were permitted to be transposed as respondents.
4.
The contentions of the Learned advocate for the petitioners in both
these petitions, as could be culled out from their oral as well as
written submissions could be summarized as under :-
The
petitioners have challenged appointment of the Government nominees
being contrary to the sub-section (3) of section 80 of the Act. The
learned advocate for the petitioners invited this court's attention
to some of the statutory provisions vital for consideration of the
Court. The provisions of sub section (3) of section 80 of the Act
has been introduced in the Act by Gujarat Act No.1 of 2008. It may
be noted that sub section (3) of section 80 begins with
non-obstante clause which states that notwithstanding anything
contained either in the Act, rule or in the by-laws, only one
director can be appointed in the State Cooperative Bank or Central
Cooperative Bank. The Central Bank is defined in clause (3) of
section 2 of the Act, which means a cooperative bank, the objectives
of which includes creation of fund to be loaned to other societies.
The by-laws of the bank provides for raising of funds and those
funds raised by the bank are used for providing loan to other
societies. The contention of giving loan by bank to other societies
stand admitted as the said fact has been admitted in the affidavit
in reply filed by the respondent no.6. Therefore, the bank is
raising funds and is giving loans to other societies is not a
disputed one. Therefore, the status of the bank as a Central
Cooperative Bank, is undisputed one, rather it is admitted.
Sub-section (1) of section 80 empowers the Government to appoint 3
nominees on the Board of Directors of the Society where the State
Government has given guarantee. The facts undisputed are that the
bank has raised loan from
NABARD and given a guarantee, therefore, in absence of provisions of
sub-section (3) of section 80 of the Act, State would have power to
nominate 3 directors on the Board. However, said power stand
abrogated in view of the special provision made in sub-section (3)
of 80 of the Act which is enacted at latter point of time, i.e. by
Act no.1 of 2008. It is settled principle of law that when there is
a special power made, the general power has to give away and
therefore sub-section (1) of section 80 of the Act cannot have an
application in case of the Central Cooperative Bank and more
particularly, the legislative intention is clear as the section
starts with non-obstante clause.
The
learned advocate for the petitioners while answering the the
contention raised by the respondent, more particularly by the
Additional Advocate General on behalf of the State that, sub-section
(3) of section 80 of the Act is meant for credit cooperative
structures and therefore, this language of section has to be read in
context thereof, submitted that the interpretation of statute
permits aid of other provision of the statues in the name of
harmonious construction only when the language was unclear,
ambiguous or the interpretation whereof results into chaotic and
absurd situation. In the present case, as the language of the
section is clear, and unambiguous no additional or external aid is
required for interpretation of the provisions. The wordings
'cooperative credit structure' nowhere figures either in the
definition of central bank or in sub-section (3) of section 80 of
the Act. When sub-section (3) of section 80 of the Act was enacted
by the legislature, it was very well aware of definition of the
Central Bank. If the legislature wanted to have the provision of
sub-section (3) of section 80 restricted to a 'cooperative credit
structure,' the legislature would have couched the sub-section (3)
of section 80 accordingly or would have provided another definition
to Central Bank. It cannot be said that the legislature was not
aware of definition of the Central Bank when the Act No.1 of 2008
was enacted. Therefore, submissions made on behalf of the State that
sub-section (3) of section 80 is required to be read so as to
embrace within its meaning only the societies falling within the
definition of the 'cooperative credit structure' is not tenable in
law and hence it deserves to
be rejected. That would be an addition to the language of
sub-section (1) of section 80 of the Act. The State wants to read
sub-section (3) of section 80 of the Act by State Cooperative Bank
or Central Cooperative Bank which would cover definition of the
cooperative credit structure. The words "which would cover
cooperative credit structure" are additions the State wants to
make in interpreting said provision which is not permissible.
Learned
advocate for the petitioner has further contended that, the
respondent's contentions in respect of the maintainability of the
writ petitions are not tenable in eye of law. The provisions of
section 140-U speaks about dispute of election. The chapter-11-A
specifically deals with election of members of the committee of
specified cooperative society. The bank is a specified cooperative
society. However, section 145-A to section 145-Y applies to the
election of committee members. Section 145-Z applies to the
election of office bearers. Election of members and election of
office bearers are two entirely different facts. Officer is defined
in clause (14) of section 2 which includes the President and Vice
President of the Society. Therefore, the provisions of election of
office bearers is provided under section 145-Z of the Act. The
legislature is clear in its legislative intent while making
provision of election dispute. Section 145-U provides that any
dispute relating to election shall be referred to the Tribunal. It
may be noted that the term 'election' has been defined in clause (b)
of section 145-B which reads, "election' means, the election
of a member or members of the committee of a specified cooperative
society". Therefore, section 145-U is required to be read in
context of definition provided in clause (b) of section 145-B of the
Act. Section 145-Z of the Act provides that the said section will
apply only to the election of officers by members of the committee
of the society belonging to categories specified in section 74-C.
Therefore, the legislative intent is clear that Chapter 11-A is made
to control the conduct of election of members of the committee of
the specified cooperative societies and for which section 145-A to
145-Y have been enacted; whereas section 145-Z is a special
provision for election of officers of the committee. The term
"officer" is not defined in Chapter 11-A whereas term
"election" is defined in Chapter 11-A itself. The term
"officer" is defined in clause 14 of section 2 which
includes President and the Vice President and therefore, no election
of office bearers can be challenged before Election Tribunal, i.e.,
Gujarat State Cooperative Tribunal under section 145-U of the Act.
Therefore, said submissions made by the respondents are not
tenable.
Learned
advocate for the petitioners has further contended that the
respondents have made submissions which on face of it is unwarranted
and untenable. The respondent has stated that the petitioners have
challenged virtually election of the Chairman. In fact the writ
petition was filed prior to holding of elections in question.
Appointment of the Government nominees cannot be challenged under
section 145-U of the Act. The Tribunal cannot go into that issue.
The Tribunal is not clothed with power to decide validity or
otherwise of appointment of the nomination by Government under
section (3) of section 80 of the Act. The respondent could not have
raised this contention. Section 145-U of the Act is clear which
embraces dispute of election of members and not the office bearers.
The respondents are making submissions by substituting the word
"member" by word "officers" which is not
intended or contemplated by the legislature. Both the words are
different and not interchangeable.
The
petition in SCA 2177 of 2011 has challenged continuation of
respondent no. 2 therein as nominee member on the Board of the Bank
as in light of the clear provisions of Section 80 (3) the respondent
no. 2 could not have continued as member nominee on the board of the
bank and his continuation is prayed to be set aside.
As
could be culled out from the grounds mentioned in the petition being
SCA 2177 of 2011 the respondent no.2's continuation as
nominee-member and as such his participation in the election to the
post of Chairman and vice chairman is also assailed on the ground
that the State Government has not made and fresh order nominating
respondent no. 2 as its nominee on the Board of the Bank after
newly elected members constituted the Board
and the old Government Resolution dated 7.1.1994 would not entitle
the respondent no. 2 to continue to act as nominee director on the
Board of the Bank.
5.
The contentions of the Learned advocate for the respondents
in both these petitions, as could be culled out from their oral as
well as written submissions could be summarized as under :-
The
learned advocate for the respondent state contended that the main
question of law which has come up for adjudication before the Court
is the question as to whether the Gujarat State Cooperative Land
Development Bank would fall within the restrictions imposed under
section 80(3) of the Gujarat Cooperative Societies Act. In the
submission of learned advocate for the State, the sub section (3)
in section 80 is added by the Legislature by Gujarat Cooperative
Societies (Amendment) Act, 2008 (Gujarat Act No. 1/2008) which is
passed by the Gujarat State Legislature to deal with the Banks
dealing with the Short Term Agricultural Credit and to implement the
recommendations of the "Vaidyanathan Committee" with
regard to such Banks only. The Land Development Bank can only
provide Long Term Agricultural Credit and recommendations of
'Vaidyanathan Committee' for Land Development Bank are still under
consideration of the Central Government. These facts are clear and
apparent from the following facts.
(a)
The Structure of Agricultural Finance in the Country
it
is submitted that in the entire country, the agricultural finance is
governed in two categories viz-
(i)
Short term agricultural finance, and
(ii)
Long term agricultural finance.
It
is submitted that the Parliament, with a view of regulating
co-operative credit and other facilities for the promotion and
development of agriculture, enacted the National Bank for Agriculture
and Rural Development act, 1981 (NABARD Act). Under the said Act,
long term agricultural finance and short term agricultural finance
are statutorily earmarked and bifurcated.
In
accordance with the scheme of the NABARD Act, there are two State
level cooperative societies rendering agricultural finance as under:
(i)
The Gujarat State Co-operative Bank - providing for short term
agricultural finance, in a three tier structure,
and
(ii)
The Gujarat State Co-operative Agriculture & Rural Development
Bank - providing for long term agricultural finance in an
unilateral structure.
It
is submitted that the NABARD Act defines 'State Co-operative Bank'
under section 2 (u) as under.
"S.2
(u) 'State co-operative Bank' means the Principal co-operative
society in a State, the primary object of which is the financing of
other co-operative societies in the State.
Provided
that in addition to such Principal society in a State, or where
there is no such principal society in a State, the State Government
may declare any one or more co-operative societies carrying on
business in that State to be also or to be a State Co-operative Bank
or State Co-operative Banks within the meaning of this definition."
It
is submitted that the NABARD Act defines 'State Land Development
Bank' under section 2(v) as under:
"S.2
(v) - 'State Land
Development Bank' means the co-operative Society which the principal
land development bank (by whatever name called) in a State and which
has as its primary object the providing of long term finance for
agriculture development:
Provided
that, in addition to such principal and development bank in a State
or where there is no such bank in a State, the State Government may
declare any co-operative society carrying on business in that State
and authorized by the by-laws of such co-operative society to provide
long term finance for agricultural development to be also or to be a
State land development bank within the meaning of this definition"
(emphasis
supplied)
It
is submitted that the Bank with which the present petition relates is
'State Land Development Bank' as defined under section 2(v) of the
NABARD Act. There is no dispute between the parties on this aspect.
It
is further submitted that Gujarat Co-operative Societies Act, 1961
also categorically and statutorily envisages a different and distinct
existence of land development banks which are governed by a separate
Chapter Viz. Chapter. XI. In the said Chapter, the term 'State Land
Development Bank' is defined in section 117 (3) which reads as under:
"S.117(3)-
(State Land Development) means a (Land Development Bank) for the
whole of he State of Gujarat and recognized as such by the
Registrar."
It
is thus clear that the short term agricultural credit is dispensed
through three tier structure viz. State Cooperative Bank, District
Co-operative Band and Primary Agricultural Credit Co-operative
Societies.
As
against this, the long term agricultural credit is dispensed though
the Land Development Bank. In some States, even land development
banks follow three tier structure.
However, in the State of Gujarat, there is no three tier structure
for land development bank. The structure of long term co-operative
credit is given by way of a chart in Vaidyanathan Committee's report
is annexed with this written submission.
It
is submitted that thus it is clear that so far as the present Land
Development Bank is concerned, it has an unitary structure and does
not have federal structure or a three tier structure (in which other
co-operative societies become the members).
Learned
counsel for the State has further discussed about Vaidyanathan
Committee, in the written
submissions as under:
"It
is submitted that with a view to provide for a statutory mechanism in
the State Legislature for governing short term and long term
agricultural finance, the Central government had appointed a
Committee to give its recommendations known as "Vaidyanathan
Committee". The said committee had given in its various
suggestions for statutory amendment sin the loan co-operative
societies Act both with respect to short term agricultural finance
(through the State Co-operative Banks) and also long term
agricultural finance (through the Land Development Banks) in its
report.
It
is further submitted that as far as short term agricultural finance
is concerned, a three-tier system is envisaged. Short term
agricultural finance is provided to farmers under the aforesaid three
tier system through the agency of State Co-operative Bank. The
agricultural finance released by the BABARD comes to the Gujarat
State Co-operative Bank Ltd, which has, as its members, District
level Central Co-operative Banks. Such District Central Co-operative
Banks have, as it members, other primary level credit co-operative
societies. The agricultural finance coming through the State
Co-operative Bank goes to such District Co-operative Banks which, in
turn, give such agricultural finance to its member primary credit
co-operative societies within the District. Such primary credit
co-operative societies have, as their respective members, individual
farmers who avail of such agricultural finance.
There
were various recommendation given by the Vaidyanathan Committee with
respect to short term agricultural finance. The state of Gujarat has
accepted the said recommendations and has entered into a tripartite
agreement executed by and between the Central Government, the NABARD
and the State of Gujarat which incorporated an obligation upon the
State Government to suitably amend the Gujarat Co-operative Societies
Act, 1961 so as to bring the same in tune with the report and
recommendations of the Vaidyanathan Committee. The Government of
India, based upon recommendations of the Vaidyanathan Committee, has
announced a revival package for co-operative societies to be
implemented through NABARD. As per the said package, primary level
agricultural credit societies, district central co-operative banks,
and State co-operative banks get the benefit of package for
compensating the losses in their balance sheet as on 31st
March 2004.
It
is submitted that a tripartite agreement is entered into by and
between the Government of India, the State of Gujarat and NABARD on
21st December 2006. The relevant part of the said
tripartite agreement is as under:
PREAMBLE:
"1. Whereas
it is considered necessary as a national priority to affirm the
following objectives for revival and restructuring of the rural
co-operative credit structure (CCS), comprising the State
Co-operative Banks (St.CBs), Central Co-operative Banks (CCBs) and
Primary Agricultural Credit Societies (PACs) including LAMPS, MPCs
and FSS affiliated to CCBs on a sustainable basis"
NOW
THEREFORE IT IS AGREED BYAND AMONG THE PARTIES AS FOLOWS:
"8.
On the execution of the present MOU by all parties.
(a)
NABARD will recommend to Reserve Bank of India (hereinafter referred
to as RBI) to keep in abeyance the ongoing regulatory actions
initiated against StCB or CCB in the State for non-compliance with
the provisions of section 11 (1) of the Banking Regulation Act,1949
(as application to co-operative societies) (hereinafter referred to
as 'the BR Act') during the period of implementation of the package,
which in any case shall not exceed three years.
(b)
NABARD as the principal implementing and pass through agency, shall
arrange for-
(i)
conduct of special audit of PACS, DCCBs and StCBs,
(ii)
designing and providing assistance for installation of a common
accounting system,
(iii)
Devising proper internal control systems,
(iv)
Designing an efficient management information system,
(v)
Assistance for computerization of CCS at all levels with appropriate
software and hardware on need based approach,
(vi)
Providing training and capacity building of required number of
personnel of the CCS in all tiers during the implementation period
of the package in the State.
(vii)
Administrative and logistic support to the State level
implementation committee (SLIC) and the District Level
Implementation Committees (DLICs)
(viii)
Lending funds to any co-operative society forming part of the CCS,
either directly or through any financial institution regulated by
RBI on such terms as set by its Board.
(c)
NABARD shall undertake and complete the above activities within the
time schedules to be arrived at by mutual consent of all the parties
to this MOU and the State Level Implementation Committee.
(d)
NABARD undertakes to constitute a task force comprising the
officer-in-charge of Gujarat Regional Office of NABARD, Registrar of
co-operative societies (RCS) of the State, Gujarat Manager/Deputy
General Manger of the Regional Office of RBI and Manging Director of
the Gujarat State Co-operative Bank to periodically review the
performance of the StCB and CCBs in the State, specifically in
respect of good governance, compliance with statutory requirements
of regulatory and supervisory norms and actions of RBI/NABARD in
that regard, and to suggest improvements in their functioning
including human resources development.
9.
The State undertakes to bring in amendments to or incorporate a
special chapter in the Gujarat State Co-operative Societies Act,
1961 to give effect to the reforms envisaged under the package
in respect of all entities which are part of the CCS. Pending such
amendments, the State undertakes to issue an Ordinance under the
powers conferred on it under Article 213 of the Constitution of
India to provide for the following in respect of all entities which
are part of the CCS:
9.1.
ensuring full voting membership rights to all depositors/borrowers
in co-operatives other than co-operative banks.
9.2.
providing autonomy to CCS in all financial and internal
administrative matters, especially in the following areas:
- interest
rates on deposits and loans in conformity with RBI guidelines,
- borrowings
and investments,
- loan
policies and individual loan decisions,
- personnel
policy, staffing, recruitment, posting, and compensation to staff,
and
- internal
control systems, appointment of auditors and compensation for the
audit.
9.3.
Restricting the State Government's equity to a maximum of 25% in
any co-operative at any level and limiting State participation in
the Board of a StCB or CCBs to only one nominee and not to have any
State nominee on the Board of any Primary Agricultural Credit
Society. The state or a co-operative at any level wishing to
reduce the State equity further would be free to do so and the
co-operative will not be prevented from doing so.
(emphasis
supplied)
9.4.
allowing transition of any cooperative registered under the Gujarat
State Co-operative Societies Act, 1961 to the parallel Self Reliant
Operative Societies Act, when enacted and permitting cooperatives
under the Self Reliant Cooperative Societies Act to be members of
federal structures registered under the Gujarat
Cooperative Societies Act, 1961 and vice versa,
9.5
allowing freedom to any cooperative in the CCS to affiliate or
disaffiliate with a federal structure of its choice,
9.6
allowing freedom of entry and exit for any unit of CCS at any level
with no mandated restrictions of geographical boundaries for its
operations,
9.7.
withdrawing any restrictive orders on financial matters like
investments to be made by cooperatives and permitting them to invest
funds, subject to the guidelines as may be prescribed by RBI,
9.8.
permitting any cooperative in all the three tiers freedom to take
loans from any RBI regulated financial institution, and refinance
from NABARD or any other refinancing agency directly or through any
RBI regulated financial institution of its choice and not
necessarily from only the federal tier to which it is affiliated and
similarly, placing its deposits with or making investments in any
regulated financial institution of its choice and not necessarily
with only the federal tier to which it is affiliated.
9.9.
laying down guidelines for the purpose of payment of dividend by
PACS in consultation with NABARD.
9.10
there shall be no compulsion on contribution to funds other than
those required for improvising the net worth/owned funds of the
societies,
9.11
the Director representing a non-credit society on the board of a CCB
or Gujarat State Cooperative Bank (GSCB) shall get disqualified in
the event of the society committing a default for a period exceeding
90 days.
9.12.
the person who is a defaulting member or a office bearer of a
defaulting PACS shall not be eligible to be elected to the Board of
the society or the bank as the case may be, or continue on the Board
for more than one year unless the default is cleared.
9.13.
ensuring implementation of regulatory prescriptions of the RBI in
the case of Gujarat State Cooperative Bank and CCBs including
suppression of the Board of the GSCB or a CCB or winding up of the
GSCB or a CCB and appointment of a liquidator within one month of
being so advised by the RBI,
9.14.
supersession of the Board of the GSCB or a CCB by the RCS under any
other clause of the Gujarat State Cooperative Societies Act, 1961
shall be done only in consultation with RBI. The Board of a PACS
shall be superseded by the RCS only under the following conditions:
9.14.1.
if a society incurs losses for three consecutive years,
or
9.14.2.
if serious financial irregularities or frauds have been identified,
or
9.14.3.
if there are judicial directives to this effect or there is
perpetual lack of quorum.
9.15.
ensuring timely elections before the expiry of the term of the
existing Board of any cooperative and within two months from the
date of super session of any Board so ensuring that members of the
Board of a PACS which has been superseded due to a reason as in
9.14.1 and 9.14.2 above would not be entitled to contest against for
a period of atleast three years after super session.
9.16.
ensuring approval of he bye-laws of the cooperatives within one
month from the date of submissions to the RCS.
9.17.
prescribing prudential norms, including CRAR, for all financial
cooperatives other than cooperative banks, but including PACS in
consultation with NABARD.
9.18.
removing at the request of NABARD/RBI director(s) CEO(s) who do not
fulfill the proper criteria stipulated by RBI in the case of GSCB
and CCBs.
9.19.
prescribing co-option of professionals on the Board of GSCB or a CCB
with full voting rights, in case professionals as stipulated by the
RBI do not get elected to the Board of the GSCB or the CCB.
9.20.
auditing of GSCB and CCBs by Chartered Accountants approved by
NABARD.
9.21.
conducting of a special audit of a StCB or a CCB if requested by the
RBI and for submitting of report to the RBI within the time
stipulated by it,
9.22.
deregistering as societies, PACS which are using the word 'bank',
'banking', 'banker' or any other derivative of the word 'bank' in
their registered named.
AMENDMENT
IN THE ACT:
In
pursuance to clause-9 in the aforesaid tripartite agreement (MOU),
the Gujarat State Legislature amended the Gujarat Co-operative
Societies Act by Gujarat Co-operative Societies (Amendment) Act, 2002
(Gujarat
Act No. 1/2008).
The
Statement of Objects and Reasons while amending the Act by Gujarat
Co-operative Societies (Amendment) Act,. 2008 is enclosed herewith
for ready reference at Annexure-B.
A
perusal of clause 9.1 to 9.22 (proposed amendment in the tripartite
agreement) and the amended provisions which are amended by Gujarat
Act No. 1/2008 would show that only intention o f the Legislature is
to amend the Act to bring it in conformity with the Vaidyanathan
Committee's report/recommendations (which is, indisputably, only
confined to State Co-operative Bank, District Central Co-operative
Bank and Primary Agricultural Credit Co-operative Societies). The
amendment of section 80 of the Act by adding sub-section (3) thereof
is in compliance with clause 9.3 of the tripartite agreement (quoted
above) and section 80(3) of the Act are read together, it would leave
no room for doubt that amendment in section 80 (3) is only confined
to State Co-operative Bank, District Central Co-operative Banks and
Primary Agricultural Credit Co-operative Societies.
LAND
DEVELOPEMNT BANK:
So
far as the Land Development Bank is concerned, as pointed out above,
it is separately defined in the NABARD Act. It is governed by an
independent Chapter provided in detail viz. Chjapter XI.
So
far as Land Development Banks in the country are concerned (which
provide for log term agricultural credit), the Vaidyanathan Committee
has made separate recommendations. It has been asserted in the
affidavit in reply filed by the State Government very specifically
(at page 106) that he Vaidyanathan Committee report for long term
agricultural credit (for Land Development Bank) is still under
consideration and no tripartite agreement is entered into and
consequently, the Act is not amended for the land development banks.
This fact is not disputed by the petitioners. The State Government
has also placed on record a letter sent by NABARD to State Land
Development Bank being letter dated 9th
March 2011, which is at Annexure-C. In the said letter, the
NABARD itself admits that so far as Gujarat State Cooperative
Agriculture and Rural Development Bank (the bank which is questioned
in the present petition) being long term co-operative credit
structure Bank (LTCCS) it is not covered by the package under which
the Act is amended.
INTERPRETATION
OF STATUTES:
So
far as the interpretation of section 80(3) is concerned, its plain
reading even with the definition clause contained in section 2(7) of
the Act makes out clearly out that it applies sonly to the State
Co-operative Bank, District Co-operative Bank and Primary
Agricultural Credit Co-operative Society.
It
is a settled principle of interpretation of statute that the
Legislative intent can be gathered from the statement of Objects ad
Reasons. During the course of hearing, the statement of Objects and
Reasons was not placed before the Court for its consideration. A
purposeful reading of Statement of Objects and Reasons make it very
clear that all amendments made by Gujarat Act No. 1/2008 are in
pursuance to and for giving effect of the aforesaid MOU (tripartite
agreement), which necessarily is confined to the societies falling in
the definition of 'cooperative credit structure' as defined (in the
amendment itself) in section 2 (7A), which reads as under:
"S.2:
7(A): 'Co-operative credit structure' means (i) the Primary
Agricultural Credit Co-operative Societies, (ii) the Central
Co-operative Banks, and (iii) the State Co- operative Bank.'
Thus,
the conjoint reading of Vaidyanathan Committee report, tripartite
agreement (MOU), the statement of Objects and Reasons and the
amendments made to bring the Act in conformity with clause 9.3 to
9.22 of the MOU, makes it amply clear that amendment in section 80,
by insertion of sub-section (3) does not apply the Land Development
Bank (the bank which is the subject after of the present petition).
For
Land Development Bank, the Central Government, the NABARD and the
Sate Governess have yet to consider as to which recommendations of
the Vaidyanathan Committee report are to be accepted. There will,
thereafter be, a similar tripartite agreement. If such an agreement
is entered into, the Legislature will be required to consider the
amendment of Gujarat Co-operative Societies Act once again are only
thereafter statutory amendments for the land development Banks will
come into effect.
Learned
advocate for the respondent State has concluded in the written
submissions that, except the aforesaid question of law, no other
contentions were raised by the petitioners and therefore were not
dealt with by the State Government."
6.
The respondent no.6 has also made written submissions elaborately
against the petitions as under:
"
It
is submitted that present petition is not tenable in law as the
petition is filed on behalf of Gujarat State Cooperative Agriculture
& Rural Development Bank Ltd. However, the petitioner no.12 who
has affirmed the petition without producing on record any resolution
passed by the Bank authorizing him to file present petition on
behalf of the Bank or empowering him to file a petition in the name
of Bank.
The
present petition is a deliberate attempt on behalf of the petitioner
to mislead the Hon'ble Court with sole intention to disturb election
which is held strictly in accordance with the provisions of by-law
No.33 of by-laws of the Bank and Section 145Z of the Act and needs
no interference especially when it has already been concluded and
present respondent has already taken over charge as Chairman as
directed by the Hon'ble Court vide order dated 6.1.201 passed in SCA
No. 25 & 26 of 2011 (Coram: Mr. Justice Jayant Patel, J).
It
is submitted that the original prayers as made in para 27(B) to
27(E) (does) did not survive in view of the fat that the State
Government has already appointed nominees on the Board of Directors
of the Bank and subsequent thereto, a meeting in accordance with
by-law No.33 has also been called, wherein at the end of due process
of election, the answering respondent was declared elected. Thus, it
is a matter of record that such nominee members have already been
appointed and they have exercised their right, privilege or power as
a member of Director and therefore, none of the prayers as prayed
for from Para 27(B) to 27(E) survive and the petition has become
infructuous for all practical purposes.
It
is further submitted that even so far as the amended prayers being
27 (CC) an 27(DD) virtually amounts to a challenge of election that
has been duly held and result whereof has already been declared. At
this juncture, it is also relevant to note that pursuant to the
result of said meeting, the answering respondent has already been
appointed as Chairman and has already started acting as a Chairman
and therefore, such a prayer qua segregation of votes and recounting
of vote is contrary to basic and fundamental democratic principle of
secrecy of votes and is wholly untenable and deserves to be rejected
at threshold.
At
this juncture it may be noted that so far as challenge to election is
concerned, there is an alternative remedy provided under he Act
itself. The Legislature has provided for a complete Code dealing with
each and every stage of election, namely, right from the preparation
of the voters list till the declaration of the results and an
aggrieved party may avail statutory remedy under Section 145U of the
Act, which reads as under:-
145U:
Disputes relating to elections to be submitted to the Tribunal:
[1]
Notwithstanding anything contained in section
96
or any other provisions of this Act, any dispute relating to an
election shall be referred to the Tribunal.
[2]
Such reference may be made by an aggrieved party by presenting an
election to the Tribunal.
Provided
that no such petition shall be made till after the final result of
the election is declared and where any such petition is made it shall
not be admitted by the Tribunal unless it is made within two months
from the date of such declaration:
Provided
further that, the Tribunal may admit any petition after the expiry of
that period. If the petitioner satisfies the Tribunal that he had
sufficient cause for not preferring the petition within the said
period.
[3]
In exercising the functions conferred o it by or under this Chapter,
the Tribunal shall have the same powers as are vested In a Court in
respect of-
(a)
proof of facts by affidavit;
(b)
summoning and enforcing the attendance of any person and explaining
him on oath;
(c)
compelling discovery or the production of documents, and
(d)
Issuing commissions for the examination of witnesses. In the case
of any such affidavit, an officer appointed by the Tribunal in this
behalf may administer the oath to the deponent.
(4)
Subject to any regulations made by the Tribunal in this behalf, any
such petition shall be heard and disposed of by the Tribunal as
expeditiously as possible. An order made by the Tribunal on such
petition shall be final and conclusive and shall not be called in
question in any Court."
It
is thus submitted that since the petitioner has an alternative
statutory remedy of going before the statutorily created Tribunal,
this Court may not invoke its extraordinary writ jurisdiction under
Article 226 of the Constitution of India. The present petition
therefore deserves to be dismissed in limine.
5.
It is further submitted that so far as prayer made in para 27(A) is
concerned, it is a matter of record that in all the elections of
Board of Directors that has taken place till date, the State
Government has been nominating Directors and such nominated members
have always participated in all the elections and have also voted at
times.
It
would not be out of place to mention at this juncture that in last
term, one of the nominated member had also contested elections for
the post of Vice Chairman. Thus, it becomes abundantly clear that
till date, the State Government had been nominating members pursuant
to the powers vested in it under he statute as well as vested under
by-law o. 28 (ii) and the contention as raised in this petition are
devoid of any merits and does not deserve any consideration by this
Court.
Respondent
no.6 has submitted that so far as the State Government's powers u/s.
80 of the Cooperative Societies Act are concerned, they are
statutory powers vested in it and even otherwise State Government
has such source of powers under bye law no. 28(ii) of petitioner
Bank which equally empowers State to make appointment.
It
is submitted that it would become abundantly clear that the present
petition is filed solely with a view to prejudice this Court and
canvass a misleading proposition that the petitioner bank is part of
societies falling under cooperative credit structure, as defined
under Section 2 (7A) of the Act though the statutory provisions in
this behalf is absolutely clear and unambiguous and the same does
not include the petitioner bank under the definition since
petitioner bank is an apex level institution disbursing long term
agricultural finance governed by an independent separate chapter.
It
is submitted that appointment of nominated members are made under
Section 80(1) and undisputedly State Government having guaranteed
repayment of dues of petitioner bank, such powers statutorily vest
in State Government. Thus contention as raised is factually and
legally untenable and deserves no consideration by this Court
exercising its extraordinary powers under Article 226 of the
Constitution of India.
It
is submitted that even while presuming for the sake of arguments
that the contention raised by the petitioners is correct, then also,
no elected member of the Bank can go out of purview of by-laws of
the Bank itself, which inter alia at by-law No.28 provide as under:-
"28.
Board of Directors:
Management of the Bank shall vest in a Board consisting of the
following Directors:
(i)
one Director shall be nominated by the Gujarat State Cooperative
Bank from amongst the members of its Board of Directors provided it
holds shares of the Bank to the extent of 1/20th
of its paid up share-capital as on 31st
March to the preceding year or Rs.5000/- whichever is less.
(ii)
3 Directors to be nominated by the Government of whom one shall be
the commissioner of the Cooperation and Registrar of Cooperative
Societies or its representative.
(iii)
One Director for each of the District except Dang shall be elected
from amongst the members whose names have been entered in the
subsidiary registers maintained at the branches situated in the
respective Districts.
Explanation:
Ahmadabad ad Gandhinagar District shall be deemed to be one District
for the purpose of this Clause. Bulsar and Dang District shall be
deemed to be one District for the purpose of this clause.
(iv)
Deleted.
Managing
Director,if appointed, under these by-laws"
It
is submitted that thus, even on presumption that the State
Government has no authority in the statute to appoint any nominee
members, the By-law of the Society itself, has a provision for
nomination of three Directors by the Government and thus, exercise
of power by the State Government and thus, exercise of power by the
State Government cannot ipso facto be said o be illegal if it merely
mentions exercise of powers u/s. 80 in as much as that under
thereby-laws of Bank itself, the State Government has the powers to
appoint three nominated Board of Directors.
It
is submitted that a blatant and deliberate attempt on the part of
petition no.10 is made to mislead this Court as can be directly
inferred by perusal of documents placed by it as Annexure-F at page
76 of paper book.
It
is submitted that the said statement is an absolute incorrect
representation before this Court making changes in title to suit
petitioner's contention and to mislead this Court creating a vague
picture that the petitioner bank is indulging into advances of credit
finances to various small societies.
In
fact, the original document as issued by the Bank is referring to
demand, recovery and deficit of i nstitutional
advances / loans
and
is not a statement of demand, recovery and deficit of any credit
cooperative society as is sought to be canvassed. It is submitted
that the original statement specifically referring to a char /
statement pertaining to institutional advances / loans for different
districts is already annexed to with reply of answering respondent.
It
is submitted that the changes made in document by petitioner is not
only limited to the extent of change of title, but it also seeks to
exclude major institutional finances viz. Finances made to various
Agriculture Produce Market Committees. In fact, the advances / loan
extended to societies was given for the purpose of constructing a
godown and creation of asset and not for further disbursement to its
members since petitioner bank indisputably does not fall under three
tier system as defined by the statute.
It
is submitted that the finance which have been given by the Land
Development Bank to some of the cooperative societies is not an
agricultural finance as stipulated in the aforesaid three tier
structure, but some finance given for the use of the society itself
for its own purposes and the same can not in any event change the
fact that petitioner bank is a society concerned with log term
agricultural finance not falling within the definition of
'cooperative credit structure'. It is submitted that even NABARD has
also in its communication dated 9/3/2011 unequivocally confirmed
that petitioner bank is involved only in Long Term Finances and not
Short term finances.
It
is submitted that so far as party affiliation of answering
respondent is concerned, the same is a matter of record and there is
no dispute qua he still continuing with the same party that he has
always been continuing with It is submitted that so far as election
of Bank are concerned, the same is an independent democratic process
where elections are contested by individuals without any party
symbols or issuance of any mandate by a recognized / registered
political party. All members elected through a democratic election
process without any party affiliation and even otherwise it is an
undisputed fact that majority of elected members belong to party
that I belong to and thus also, role of nominated members does not
assume any significance. Such averments by petitioner with regard to
political affiliation are uncalled for and deserves no consideration
of the Court since they are a matter of internal affairs of a
political party.
At
the end the respondent no.6 has submitted that the present petition
is devoid of any merits and does not deserve any consideration of
the Court over & above the fact that the prayers made therein
are already not surviving and the same has become infructuous."
This
Court heard learned advocates for the parties and perused the orders
impugned. Before adverting to the rival submissions of the advocates
for the parties, it would be most appropriate to enumerate here
under the indisputable aspects emerging therefrom, namely:-
Gujarat
State Cooperative Agriculture & Rural Bank Limited has produced
its bye-laws as amended up to 8/2/2008. A close perusal of these
by-laws conclusively establishes that the Bank is governed by
Chapter-XI of the Gujarat Cooperative Societies Act, 1961.
Chapter-XI contains provision from section 116 to 145. In a way it
can be said that it contains specific provisions required to be
enacted specially for governing the business, affairs and conduct of
Land Development Banks like the Bank in question. The close reading
of relevant provision of Cooperative Societies Act would clearly
indicate that that the Act contains specific Chapters devoted to
deal with a class of cooperative societies like Chapter-X(A) for
Insured Cooperative Banks, Chapter-X(D) is for certain other
provisions relating to Urban Cooperative Banks. Chapter-VI is for
Land Development Banks.
The
Bye-laws produced by the Bank at page-27 contains clause no. 3(i)
which indicate that "to advance loans for the purposes
enumerated in section 116 of the Act". The entire clause-3
unequivocally go to show that this Bank is essentially a Bank
governed by Chapter XI of the Cooperatives Societies Act.
The
Bank initially appears to have been interested in challenging the
nomination of Respondent no. 4 and 5 on it's Board and hence a
petition being Special Civil Application No. 223 of 2011 came to be
filed by the Bank along with 13 elected directors. But as could be
seen from the subsequent communication dated 23/1/2011 addressed to
their advocate who had filed the petition and to the Registrar of
this Court dated 24/1/2011, Bank indicated that it was not
interested in pursuing the petition and was desirous of withdrawing
the petition as the Bank has accepted position of respondent no.4
and 5 as Government's nomination on the board of directors of the
Bank. The precise averment made in this letter dated 24/1/2011 are
required to be set out as under:
" The
petitioner no.1-bank has accepted the appointment of the respondents
no.4 and 5 as Government nominees of the Board of Directors of the
bank. The petitioner no.1-bank is no longer interested in challenging
the action of the State Government in appointing the government
nominees under section 80 of the Act and, therefore, the petitioner
no.1-bank wants to withdraw the aforesaid petition being S.C.A.
No.223/2011 qua the petitioner no.1-bank.
The
petitioner no.1-bank has already informed the concerned advocate who
had filed the aforesaid petition on telephone. However, by way of
caution, a copy of this letter is also forwarded to the concerned
advocate."
In
view of this, the petition qua petitioner no.1-Bank stood withdrawn,
However on 28/2/2011 respondent no.6 & 10 were permitted to be
transposed as respondent no.6 & 7 respectively.
The
relevant clauses & provisions from the Bye-Law annexed with the
petition by the Bank deserves to be set out here under.
" BY-LAWS
Of
THE
GUJARAT STATE CO-OPERATIVE AGRI & RURAL DEVEOOPMENT BANK LTD.
"3.
Objects:
The
objects of the Bank shall be:
i)
To advance loans for the purposes enumerated in section 116 of the
Act.
ii)
To grant loans to any person or persons, corporate body established
under any law for the time being in force, on such terms and
conditions including nature of security as the Board may decide from
time to time. It shall be competent for the Bank to make advances to
boring contractors including Co-operative Societies and Panchayats
at such rate of interest, and on such terms and conditions as the
Board may decide, provide such contractors are members of the Bank.
iii)
To grant Loans to tenants under the various Land Reforms and Tenancy
Acts in force in the area of operation of the Bank.
iv)
To grant loans to the Co-operative Farming Societies.
v)
To grant financial assistance to Societies functioning mainly for
the purposes of promoting Schemes of land improvement.
3(viii)To
buy and sell securities of the Government of India, the Government of
Gujarat or other securities specified in clauses (a), (b), (c) , and
(d) of Section 20 of the Indian Trust Act, 1882 and to act as Agents
for buyers and sellers of such securities.
x)To
grant loans for all such purposes refinanced by National Bank for
agriculture and Rural Development and such other statutory bodies of
Central and State Government.
4
. The Bank shall have powers to:
(a)
Float debentures on such terms and conditions as may be approved by
Government on the security of its assets and mortgages of immovable
property, and also against securities as taken in hypothecation,
pledge and charge.
(b)
Receive deposits and borrow money otherwise than by issue of
debentures.
Acquire
such immovable properties and construct such buildings as it may
consider necessary for the proper conduct of its business.
5.
(a) The membership of the Bank shall be open to:
(a)
government. (b) All societies registered under the Act in the area of
operation of the Bank. (c) All tenants as qualified and eligible for
loan under the Saurashtra Land Reforms Act. (d) all other persons.
6
(a) Any person who intends to be enrolled as member, shall make an
application in the prescribed form to the Bank or to any of its
offices as the Board may prescribe.
(a)
Every member shall hold atleast one share and every application
shall be accompanied with the amount required for shares applied.
Every member shall pay an entrance fee of Rs.5 such fee shall be
non-refundable.
(b)
Every individual borrower shall subscribe for shares of the
aggregate face value of atleast 5% or more of its total borrowings
from eh Bank as the Board may decide.
Provided
that the Board may prescribe lesser amount for any specified
borrowing by the members.
Funds
to be raised y the Bank:
The
funds of the Bank may be raised by (a) Share (b) Debentures (c)
Government loans and Deposits (d) borrowing from State Bank of
Saurashtra or State Bank of India or any other Bank or National Bank
for Agriculture and Rural Development (Nabard) or any other statutory
corporation or any other Financial Institution under Government
Guarantee (e) Non-Government deposits (f) other borrowings (g) fees
and (h) donations.
Provided
that the aggregate amount of the funds raised under clauses (b), (c)
, (d), (e) and (f) shall not exceed four times the aggregate amount
of paid-up share capital and reserve fund and building fund minus
accumulated losses if any of the bank or such other higher limit as
may be sanctioned by the Registrar,
Provided
further that the total amount due on Debentures and outstanding any
time should not exceed the limit prescribed in Section 119 of the
Act.
Authorized
Capital:
The
authorized and issued share capital of the Bank shall be
Rs.1,00,00,00,000/- made up of 10,00,00,000/- shares of Rs.10/-
each.
The
Bank may receive from the Govt. as contribution towards its share
capital such sums upon such terms and conditions as may be agreed
upon between the Bank and the Govt.
Debentures:
The
Registrar or where the Government appoints any other person in this
behalf, such person, shall be the trustee for the purpose of securing
the fulfillment of the obligations of the Bank to the holders of the
debentures issued by the Bank. All the property of the Bank on the
security of which such debentures are issued shall vest in the
Trustee.
Board
of Directors:
The
Management of the Bank shall vest in a Board consisting of the
following Directors:
(i)
One Director shall be nominated by the Gujarat State Co-operative
Bank from amongst the members of its Board of Directors, provided it
holds shares of the Bank to the extent of 1/20 of its paid up
share-capital as on 31st
March of the preceding year of Rs.5,000/- whichever is less.
Three
Directors to be nominated by the Government of whom one shall be the
Commissioner of Co-operation and Registrar of Co-operative Societies
or his representative.
One
Director for each of the district except Dang shall be elected from
amongst the members whose names have been entered in the subsidiary
registers maintained at the branches situated in the respective
districts.
Explanation:
Ahmedabad
and Gandhinanagar district shall be deemed to be one district for the
purpose of this clause. Bulsar and Dang district shall be deemed to
be one district for the purpose of this clause.
DELETED.
Managing
Director, if appointed, under these by-laws."
(5)
The relevant provisions of the Cooperative Societies Act also need
to be set out hereunder for appreciating their purport in correct
context.
"2
(3) 'Central Bank'- Means a co-operative bank, the objective of
which include the creation of funds to be loaned to other
societies.
7)'Co-operati9ve
Bank'- Means a society registered under this Act and doing the
business of banking, as defined in clause (b) of sub-section (1) of
section 5 of the Banking Companies Act, 1949 (X of 1949),'
(*7A)
"Co-operative credit structure" means (i)the Primary
Agricultural Credit Cooperative Societies; (ii) the Central
Co-operative Banks; and (iii) the State Co-operative Bank;"
(*13A)
"National Bank" means the National Bank for Agriculture
and Rural Development established under Sec.3 of the National Bank
for Agriculture and Rural Development Act, 1981 (LXI of 1981)"
Power
to appoint Government nominee:
(1)
Where the State Government has subscribed to the share capital of a
society, directly or through another society, or has guarantee the
repayment of the principal of an payment of interest on, debenture
issued or loans raised by a society, (2) the State Government shall,
notwithstanding anything contained in bye-laws of such society, have
the right to nominate three representatives in the bye-laws of such
society); in such manner as may be determined by the State
Government from time to time. The members so nominated shall hold
office during the pleasure of the State Government, or for such
period as may be specified int eh order by which they are appointed,
and any such member on assuming office shall have all rights,
duties, responsibilities and liabilities as if he were a member of
the committee duly elected.
Explanation:-
Any combination of the Registrar of his nominee on the Committee of a
society under the bye-laws of such society shall not be construed as
nomination of the representative on that Committee in exercise of
the right of the State Government under this sub-section.
(2)
Where the State Government is of the opinion that having regard to
the public interest involved int eh operation of a society it is
necessary or expedient so to do, it may nominate its
representatives on the committee of such society as if the State
Government had subscribed to the share capital of the society and
the provision of sub-section (1) shall, so far as may be, apply to
such nomination.
*(3)
Notwithstanding anything contained in this Act or the rules or in the
bye-laws, there shall be only one nominee of the State Government in
the committee of the State Co-operative Bank or the Central
Co-operative Bank where the State Government has subscribed to the
share capital of such co-operative banks and no such nomination shall
be made where the state Government has not subscribed to the share
capital for such co-operative banks and no such nomination shall be
made on the committee of a primary Agricultural Credit Co-operative
society irrespective of whether the state Government has subscribed
to the share capital of a society or not."
CHAPTER-XI
LAND
DEVERO-MENT BANKS
116.
Application for chapter to certain Land Development Banks:
117.
Definition:
In
this Chapter unless the context otherwise requires:-
"Land
Development Bank" :- means a Co-operative Bank registered or
deemed to be registered under this Act, and to which this Chapter
applies;
(2)
"Primary Land Development Bank": means Land Development
Bank recognized as Primary Land Development Bank by the Registrar;
(3)
State Land Development Bank: means a Land Development Bank for the
whole of the State of Gujarat and recognized as such by the
Registrar.
118.
Appointment, powers and functions of Trustee:
(1)
The Registrar or where the State Government appoints any other
person in this behalf, such person, shall be the Trustee for the
purpose of securing the fulfillment of the obligation of the State
Land Development Bank to the holders of debentures issued by the
State Land Development Bank.
(2)The
trustee shall be a corporation sole, by the name of the Trustee for
the debentures in respect of which he is appointed and, as such,
shall have perpetual succession and a common seal, and in his
corporate name may sue and be sued.
(3)The
powers and functions of the Trustee shall be governed by the
previsions of this Act, and the instrument of trust executed between
the State Land Development Bank and the Trustee, as modified from
time to time by mutual agreement between he State Land Development
Bank and the Trustee.
119.
Issue of debentures:
With
the previous sanction of the State Government and the Trustee, and
Subject to the rules, the State Land Development Bank in the
discharge of its functions issue debentures of such Bank in the
discharge of its functions issue debentures of such denominations,
for such period, and at such rates of interest, as it may deem
expedient on the security of the mortgages, or mortgages to be
acquired or partly on mortgages held and partly on those to be
acquired and properties and other assets of its land mortgage
business.
Every
debenture may contain a term fixing a period not exceeding thirty
years from the date of issue during which it shall be redeemable, or
reserving to the committee the right to redeem at any time in
advance of the date fixed for redemption after giving to the
holders of the debenture not less than three months notice in
writing.
The
total amount due to debentures issued by the State Land Development
Bank, and outstanding at any time, shall not exceed:-
(a)
where debentures are issued against mortgages held, the aggregate
of:-
(i)the
amounts due o the mortgages;
the
value of the properties and other assets transferred or deemed to
have been transferred under section 124 by Development Bank and
subsisting as such time and
the
amounts paid under the mortgages aforesaid and he unsecured amounts
remaining in the hands of the State Land Development Bank or the
Trustee at the time;
(b)
where debenture are issued otherwise than a mortgages held, the total
amount as calculated under clause (a) increased by such portion of
the amount obtained on the debenture as is not covered by a mortgage.
"120.
Guarantee by State Government:
The
principal of, and interest on, the debentures issued under section
119 shall, to such maximum amount as may be fixed by the State
Government and subject to such conditions as the State Government
may think fit to impose, carry the guarantee of the State
Government"
(6)
The Bank is certainly not one of the society falling under the
definition of "Co-Operative Credit Structure " as
provided under the Section 2 (7-A) of The Gujarat Co-Operative
Societies Act 1961.
(7)
The The Government has vide its order dated 1/1/2011 nominated
Respondent No.4 & 5 to be member of the Board of Directors of
the Bank.
(8)
The Elections for the post of Chairman and vice chairman are over on
17.01.2011 as ordered by this Court on 6.01.2011 in two writ
petitions being SCA 25 and 26 of 2011.
(9)
The Bank has accepted the nominations and accordingly withdrawn
petition being SCA 223 of 2011 qua itself vide it's letters dated
23.01.2011 and 24.01.2011.
(10)
The petitioner of SCA 2177 of 2011 has lost the election against the
present incumbent respondent no. 6 in SCA 223 of 2011.
(11)
The petitioner of SCA 2177 of 2011 has filed the petition in his
individual capacity and not by or on behalf of the Bank.
(12)
The petitioner of petition no. 2177 of 2011 has placed on record the
Government Resolution dated 7.01.1994 nominating the Respondent No.
2 by designation to be member of the Bank's Board till further
orders and no material is placed on record to indicate in any manner
that it has come to an end.
(13)
On the contrary the said GR dated 7.01.1994 is said to have been in
operation where under the respondent no. 2 in SCA 2177 of 2011
appears to have acted as nominated member on the Board of the Bank.
(14)
The remaining petitioners of SCA 223 of 2011 also do not have any
authority from the Bank to continue with the petition rather the
Bank has made specific request for permitting it to withdraw the
petition qua itself accordingly now the remaining petitioners in
that petition also cannot claim any legitimate right to voice
grievances on behalf of the corporate body like the Bank.
8.
Against the aforesaid backdrop of indisputable aspects now let us
examine closely the contentions raised by learned counsels of
the respective parties.
9. A
close perusal of the provisions of Section 2 (3), 2 (7), and 2(7-A),
would go to show that all Co- operative Banks as defined under
provisions of Section 2(7) are not essentially "Central Bank"
forming part of the "Co- operative Credit Structure" as
came to be defined for the first time under provisions of Section
2(7-A) of the Cooperative Societies Act 1961. A 'Co-operative Bank
' as defined under Section 2(7) of the Act is certainly a registered
society doing business of banking as defined in clause (b) of Sub
clause (1) of Section 5 of the Banking Companies Act 1949. This Co-
operative Bank, as such, if has no further qualification or
attributes of objective of creation of funds to be loaned to other
societies than, it would not be covered by the definition of
"Central Bank" as provided under Section 2(3) of the
Cooperative Societies Act and in turn not form part of the
"Co-operative Credit Structure" as defined under section
2(7-A) of the Cooperative Societies Act.
10.
The legislature has, by introducing new subsection (7-A) in section
2, in the Gujarat Cooperative Societies Act 1961 for the first time
recognized and provided for existence of "Cooperative Credit
Structure" consisting of three tiers namely (i)the Primary
Agricultural Credit Cooperative Societies being the primary tier or
the first rung in the ladder, (ii) the Central Co-operative Banks,
being second tier or middle rung in the ladder. And (iii) The State
Cooperative Bank, the apex tier or third rung in the ladder. After
recognizing and providing for this three tiers system by way of the
one of the provisions of Gujarat Act 1 of 2008 the legislature made
various provisions for the first time for making it work in
accordance with the objective for creating it, in the very same
Gujarat Act 1 of 2008 as could be evident from the various new
provisions came to be inserted at various places in the Gujarat
Co-Operative Societies Act 1961.
11
It would be expedient to refer to some of the provisions which came
to be inserted by way Gujarat Act 1 of 2008 into the Gujarat
Cooperative Societies Act 1961 for facilitating smooth working of
the "Cooperative Credit Structure" for its defined
objective. The legislature has provided for regulating membership in
the Primary Agricultural Credit Cooperative Society by inserting
subsection 4 and 5 into Section 22 without mentioning words "
Co-operative Credit Structure" whereas the legislature has, by
inserting new section being Section 44-A made express provisions
defining powers of Committee of Cooperative Credit Structure, which
inures only for the societies forming part of the "Cooperative
Credit Structure" and no other Co-operative society or
Co-operative Bank can claim those powers contained in Section 44-A
of the Cooperative Societies Act 1961. Though provisions of section
45 as it stood originally contain general restrictions on societies'
loan making powers but by inserting subsection (3) in section 45 a
special provision is made so far as the Primary Agricultural credit
Societies are concerned without specifically mentioning "
Co-operative Credit Structure" in the entire section 45.
Chapter V of the Gujarat Co-operative Societies Act 1961 captioned
as "State Aid to Societies" contains provisions from
Section 51 to section 64. the legislature has made only one
amendment in form of proviso to subsection (2) of Section 51 of the
Gujarat Co-operative Societies Act 1961 by statutorily regulating
State's discretion of subscribing to the shares capital of
cooperative societies covered by "co-operative credit
structure" which is otherwise not found in case of societies
not forming part of the Co-operative Credit Structure.
12.
The provisions of Section 64 gives overriding effect to the
provisions of Chapter V of the Co-operative societies Act, It
specifically provides that the provisions of section 52 to 62 (both
inclusive) in the Chapter V shall have effect notwithstanding
therewith contained in any other law for the time being in force.
The Gujarat Act No. 1 of 2008 has not made any change to this
provisions and therefore provisions of section 80 (3) are to be
construed bearing in mind the non obtante provision of Section 64 of
the Act, which gives over riding effect to the provisions of Section
52 to 62 of the Gujarat Co-operative Societies Act 1961 not only on
the provisions of the Cooperative societies Act, Rules and Bye laws
but also upon provisions of other law time being in force.
13.
The legislature has made special provisions in form of Chapter XI
captioned as " Land Development Banks" containing
section 116 to 154 in the Gujarat Co-operative societies Act 1961.
The provisions of Section 116 makes it amply clear that the said
chapter applies to "Land Development banks" advancing
loan other than short term loans for the purpose mentioned therein.
I have already in detail set out relevant bey-laws of the Bank and
other provisions of Chapter XI hence I need not repeat the same here
under but collective reading thereof would go a long way to
establish that the Bank is essentially a Co-operative Bank governed
by the provisions of Chapter XI and especially section 116 to 154
and it is not certainly a part of the "Co-Operative Credit
Structure" as defined under the provisions of Section 2(7-A)
of the Gujarat Cooperative societies Act 1961.
14. Thus
close reading of the aforesaid provisions contained in Gujarat
Cooperative Societies Act, 1961, it becomes clearer that the Land
Development Banks are certainly not forming part of the Co-operative
Credit structure as defined under section 2 (7A) of the Act. The
Land Development Banks have different set of regulations in the
form of previsions made under Chapter-XI of the Cooperative
Societies Act. The Legislature has very succinctly provided even
definition clause in that very chapter which would lend a distinct
character to the Land Development Banks which are certainly not part
& parcel for the Cooperative Credit Structure as defined under
section 2 (7A) of the Cooperatives Societies Act.
15.
The provisions of section 80(1) of the Gujarat Co-operative
Societies Act 1961 empowers State government to nominate its three
representatives in the committee of a cooperative society in the
following eventualities namely (i)where the Government has
subscribed to the share capital of a society, directly or through
another society, or (ii) where the Government has guaranteed the
repayment of the principal of and payment of interest on, debentures
issued or loans raised by a society. The members so nominated shall
hold office during the pleasure of the State Government , or for
such period as may be specified in the order by which they are
appointed. The explanation provides that any nomination
of the Registrar or his nominee on the committee of a society under
the bye-law of such society shall not be construed as nomination of
the representative on the committee in exercise of the right of the
State Government under this subsection. The sub-section (2) of
Section 80 empowers the State to exercise it's powers of nominations
to a society even if the Government has not subscribed to its share
capital or not guaranteed repayment of loan or interest but it forms
an opinion to the nomination is warranted in public interest. In the
instant case this court need not dwell much upon the purport of
provisions of sub-section (2) of Section 80 as admittedly the State
has not invoked sub-section (2) of Section 80 while nominating
respondent No. 4 and 5 and the Registrar Co-operative Societies on
the Board of the Bank.
16.
Thus State's power to make nomination in the committee of a
cooperative society was statutorily recognized and accepted. However
for the first time by way of addition of Sub-Section (3) to Section
80 an exception was carved out. This exception therefore is required
to be construed strictly in accordance with the established
principles of law. The plain reading thereof indicates that the
State's statutory power to make nomination in the Board or committee
of a society is restricted and regulated in case of type of
cooperative societies and eventuality mentioned therein. The
sub-section (3) of Section 80 being in nature of exception to the
discretion contained in Section 80 needs to be construed strictly.
The said subsection (3) of Section 80 provides
that notwithstanding any thing contained in the cooperative
societies Act, or the rules or in the bye-laws there shall be only
one nominee of the State government in the committee of the State
Co-Operative Bank, or the Central Co-Operative Banks, where the
State Government has subscribed to the share capital of such
co-operative banks, and no such nomination shall be made where the
State Government has not subscribed to the share capital of such
co-operative bank and no such nomination shall be made on the
committee of a Primary Agricultural Credit Co-operative Society
irrespective of whether the State Government has subscribed to the
share capital of a society or not. Thus out of total two
eventualities envisaged under Section 80 (1) namely (i) State
government's subscribing to the share capital of a society, directly
or through another society, or (ii) the Government's guarantee for
repayment of the principal and payment of interest on, debentures
issued or loans raised by a society for exercising powers of
nominating its representatives under Section 80(1) of the Gujarat
Cooperative Societies Act 1961, only one eventuality is referred to
and relied upon for restricting and regulating the State
Government's Powers to appoint nominees on the committee of a
society under Section 80 (1) of the Act. The subsection (3) of
section 80 is conspicuously silent so far as the second eventuality
of State government's guarantee on repayment of principal or
payment of interest by a society is concerned. In other words the
provisions of subsection (3) of Section 80 do not regulate or
restrict the State Government's discretion of nominating its
representatives in the committee
of a society where it has guaranteed repayment of principal or
payment of interest of loan or debentures.
17.
The restriction containing in subsection (3) of Section 80 upon the
State Government's discretion in nominating its representatives in
the committee of a co-operative society, share capital whereof is
subscribed by the Government cannot be stretched further so as to
encompass the eventuality of State Government's guarantee for
repayment of principal or payment of interest by that society as
that eventuality is not covered by the provisions of subsection (3)
of section 80 of the Gujarat Co-operative Societies Act 1961. To
read that eventuality into subsection (3) of Section 80 would amount
to reading what is not provided by the legislature. The Court is not
to undertake an exercise of reading
casus omissus
in the provisions of law where there is none and attempt to provide
something which is not even envisaged by legislature as it could be
seen from the plain language of the provision.
18.
Thus assuming for the sake of examining the submission of the
petitioners, without holding, that the Bank in question is "Central
Bank" and as such it is entitled to receive benefit of
employment of phraseology of "the Central Co-operative Banks"
in subsection (3) of section 80 without it being required to be
part of "Co-operative Credit Structure" as defined under
Section 2(7-A), which it is admittedly not, than also on account of
plain and simple reading of subsection (3) of Section 80 it
can be said that the Bank in question would certainly not be covered
by the exception only on account of State Government's non
subscription to it's share capital in absence of any evidence that
the State has not in any way guaranteed any repayment of principal
or payment of interest on behalf of the Bank. On the contrary the
the petitioner's advocate has in his written submission mentioned as
under " The
contention of giving loan by bank to other societies stand admitted
as the said facts has been in the affidavit in reply filed by the
respondent no. 6, therefore ,the bank is raising the funds and
giving loan to other societies is not disputed one. Therefore the
status of the bank as a central cooperative bank is undisputed one
rather it is admitted. Sub-section 1 of section 80
empowers the Government to appoint three nominees on the Board of
the Directors of the society where the State Government has given
guarantee. The facts
undisputed are that the bank has raised loan from NABARD and given a
guarantee, therefore, in absence of provisions of sub-section (3) of
section of the State , State would have power to nominate 3
directors on the Board, however said power stand abrogated in view
of the special provision made in sub section (3) of 80 of the Act
which is enacted at later point of time..i.e. By Act No.1 of 2008."
( the emphasis supplied). Thus from the aforesaid it becomes clear
that the second eventuality of State Government being guarantor or
giving guarantee for repayment of principal or payment of interest
being not covered under the provisions of sub-section (3) of section
80 the bank in question did not have any right to challenge the
nominations
made by the State government.
19.
The petitioner of SCA 2177 of 2011 has in fact no independent right
of challenging the continuation of respondent no.2 I.e. The
Registrar Co-operative Societies. The main ground of challenge being
the provision of subsection (3) of Section 80 of the Gujarat
Co-operative Societies Act 1961 no further separate elaborate
reasoning is required to be resorted to as the aforesaid discussion
would answer the contention.
20.
The second submission in SCA 2177 of 2011 against the continuation
of respondent no. 2 on the Board of the Bank, being non issuance of
fresh nomination orders in favour of the respondent no. 2 by the
State, also doest not merit is elaborate discussion. The provisions
of Section 80 (1) read with the Government GR dated 7.01.1994 would
make it clear that there was no requirement of issuance of any fresh
orders renominating the Registrar Co-operative Societies as one of
the members on the Board of the Bank. The Bank's bye-law and the
stands taken by the Bank coupled with the plain reading of
provisions of Section 80(1) would be sufficient to negative the
second contention made in the petition being SCA 2177 of 2011.
21.
The Court at this stage would also like to observe
that this Court has held in group of writ petitions being Special
Civil Application No. 5583 of 2011 and allied matters, that except
the Cooperative Society, a body corporate by virtue of section 37 of
the Gujarat Co-operative Societies Act 1961, none has any right
whatsoever to challenge the action which in fact is the action to be
complained of only by the Society as such . The nomination if at all
is not acceptable by the society than the society as a body
corporate has to challenge the same. This right of challenge,
nomination need not be stretched to the individual members
independent of society whose bye-laws are binding on them.
22.
The decisions cited at the Bar are pertaining to exercise of power
under section 80(2) of the Gujarat Cooperative Societies Act. That
being not the question here, said section is of no avail to the
petitioners, and even the State has not contended that they have
appointed nominee in exercise of power under section 80(2) of the
Gujarat Cooperative Societies Act, 1961.
23.
From the aforesaid discussions the following conclusions could be
made, namely:-
(1)
The Bank in question cannot be said to be entitled to raise
maintainable challenge against the order of nomination only on the
strength of sub section (3) of Section 80 of the Gujarat Cooperative
Societies Act, 1961, as sub section (3) of section 80 does not cover
the Cooperative Bank for whom the State has guaranteed repayment of
principal or payment of interest etc.
(2)
The petitions are capable of being rejected only on the aforesaid
ground. However it would be appropriate at this stage to note that
the right to challenge the order of nomination inures in favour of
the Bank as a body-corporate and does not inure in favour of any
individual member independent of the Bank as a body-corporate.
Therefore on this count also it is required to be noted that the
petitioners in light of the letters addressed by the Bank on
23/1/2011 and 24/1/2011 did not have right to maintain the petition
contrary to the stand taken by the Bank which is reflected in its
above said two letters.
(3)
The petitioner in Special Civil Application No. 2177 of 2011 also
has not been supported in any manner by the Bank, as body-corporate
capable of being sued and sue, could not have maintain petition
challenging continuation of respondent no.2 the Registrar,
Cooperative Societies on the board of the Bank. The main ground on
which the continuation is challenged was insertion of sub section
(3) in section 80 of the Gujarat Cooperative Societies Act, 1961,
and as this Court has negatived the petition being Special Civil
Application No. 223 of 2011 on identical challenge, the Court is of
the view that the same reasoning would apply for rejection of this
petition also. Moreover the additional ground urged into service
that the respondent no.2 Registrar could not have acted as a member
of the board in absence of fresh nomination orders would be not
tenable in view of the explicit language of section 80 (1) of the
Act. Thus reading with the bye-laws of the Bank and the provision of
section 80(1) it can be said that there was no requirement on the
part of the State for issuing fresh nomination as the G.R. Dated
7/1/1994 is still in force and not shown to have been repealed or
recalled.
24.
In view of the aforesaid conclusions, both the petitions being
bereft of merits are required to be dismissed and are accordingly
dismissed. Interim relief, if any granted earlier, shall stand
vacated.
[
S.R. BRAHMBHATT, J ]
FURTHER
ORDER:
After the pronouncement, Shri Mangukiya, learned advocate appearing for the petitioners in both these petitions requested for extension of the order dated 17/1/2011 for a period of ten days, so as to enable the petitioners to prefer Letters Patent Appeal challenging this judgment & order. The request is accepted. The order dated 17/1/2011 so far as it contains the clarification that 'whatever transpired during pendency of these petitions is made subject to final outcome of these petitions' would inure for a further period of ten days from today, i.e. up to 22/6/2011.
[ S.R. BRAHMBHATT, J ] /vgn Top