Calcutta High Court (Appellete Side)
The Bengal Secretariat Co‐Operative ... vs Sri Aloke Kumar on 8 August, 2018
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
In the High Court at Calcutta
Civil Revisional Jurisdiction
Appellate Side
The Hon'ble Justice Sabyasachi Bhattacharyya
C.O. No. 2714 of 2014
The Bengal Secretariat Co‐operative Land Mortgage Bank & Housing Society Ltd. and another
vs.
Sri Aloke Kumar
For the petitioners : Mr. Saptangshu Basu,
Mr. D. K. Sengupta,
Ms. Jaya Datta,
Ms. Sweta Saha
Opposite party in person : Mr. Aloke Kumar
Hearing concluded on : 25.07.2018.
Judgment on : 08.08.2018.
Sabyasachi Bhattacharyya, J.:‐
The opposite party, a member/Director of the petitioner society, instituted a dispute
case, bearing Dispute Case No. 47 of 2002‐2003, for the following reliefs:
a) Declaring that all actions of the member right from the publication of the notice inviting
bids, float of bid documents, the proceedings and resolution in the adjourned Annual
General Meeting of the aforesaid Society held on May 5, 2002 accepting the offer of M/s
Hi‐Rise Apartment Makers Private Limited and acceptance of earnest money and
security deposit of Rs. 10 lakhs from them and thereafter, were illegal and void; and
b) Permanently restraining the defendants and their men and agents from proceeding
further and taking any steps further on the basis of the said illegal resolution; and
c) Costs of the case.
2. Such case was filed before the Registrar, Co‐operative Societies and was referred to an
arbitrator. The said proceeding culminated in a contested award dated December 21, 2004. The
operative portion of the award stood as follows:
" A W A R D
1) That the society shall restrain itself from taking any step towards demolishing the existing
constructions of the Administrative Building of the society as part of a joint venture with a
Private promoter/developer, M/s. Hi Rise Apartment Makers Pvt. Ltd.
2) That special general meeting be called with clear one month's notice ensuring receipts by all the
members ‐ discussing the issue in every detail with transparency at every stage being observed
to the full, and any resolution taken thereof in favour of the BOD's proposal of this nature be
sent to the Registrar of Cooperative Societies, West Bengal for his approval as required under
Rule 149 (11) of W.B.C.S. Rules, 1987. "
The petitioner preferred against the aforesaid award an appeal, bearing no. 7 of 2005,
before the West Bengal Cooperative Tribunal, which was dismissed for default on March 24,
2006 in the presence of the present opposite party.
The award‐holder/opposite party put the said award into execution by filing an
application under Section 151, read with Order XXI Rule 32 (5) of the Code of Civil Procedure,
thereby giving rise to Arbitration Execution Case No. 19 of 2009 before the Civil Judge (Senior
Division), Ninth Court at Alipore, District: South 24‐Parganas.
The award‐debtor/petitioner contested the same by filing a written objection thereto.
The award‐debtor also filed a petition for putting up the execution petition to decide
maintainability of the same.
An order of attachment was passed in the execution case.
3. The Civil Judge (Senior Division), took up all pending applications, including the
application challenging maintainability of the execution case and, vide order dated April 17,
2014, held that the execution case was still maintainable in law since the award was yet to be
satisfied at the instance of the award debtor/Society.
4. The order of attachment, passed in the meantime, was also vacated.
5. Being dissatisfied with the said order dated April 17, 2014, the petitioner Society and
its Secretary have preferred the instant application under Article 227 of the Constitution of
India.
6. Learned Senior Advocate appearing for the petitioners argues that both the
components of the arbitral award have been satisfied in the meantime. The Society cancelled its
agreement with M/s Hi‐Rise Apartment Makers Private Limited and has entered into a new
agreement regarding construction of the administrative building of the Society. It was further
argued that, in any event, a special general meeting had been called in the meantime on January
15, 2006 in terms of the second component of the award. It is argued that satisfaction of the
second component of the award automatically rendered academic the first component thereof,
since, according to him, nothing remained in the first component after alleged satisfaction of the
second.
7. Apart from holding a special general meeting, it is submitted, the petitioner / Society
also took steps for sending its proposal with regard to the proposed Administrative Building to
the Registrar of Co‐operative Societies. However, it was informed by the Joint Registrar of Co‐
operative Societies (Housing), West Bengal to the Secretary of the petitioner‐Society that no
formal permission was required from the Registrar of Co‐operative Societies under the
provisions of the West Bengal Co‐operative Societies Act, 2006 and West Bengal Co‐operative
Societies Rules, 2011 for building the office‐cum‐administrative building as per the petitioner,s
by‐laws, within the ambit of the relevant provisions of the Kolkata Municipal Corporation
Rules. As such, learned Senior Advocate submits, no permission was required at all as
contemplated in the second component of the award.
8. In the light of such developments, the petitioners submit that the award ought to have
been held to be satisfied and the execution case dropped.
9. The award holder/opposite party, appearing in person with the leave of Court,
submits that the pretended compliance with the arbitral award by the petitioners was a mere
eye‐wash.
10. Despite the specific direction in the arbitral award, that the petitioner no. 1 Society
should restrain itself from taking any steps towards demolishing the existing constructions of
the administrative building of the Society as part of a joint venture with M/s Hi‐Rise Apartment
Makers Private Limited, the petitioner no. 1 / Society merely renewed such agreement, upon
making cosmetic changes to the original joint venture agreement, and has been proceeding full‐
blast with the demolition work in collaboration with M/s Hi‐Rise Apartment Makers Private
Limited, contrary to the award.
11. As to holding a special general meeting, the opposite party submits that notice of
such meeting was not served on all the members. Moreover, the notice did not match the actual
resolution proposed and taken in the special general meeting dated January 15, 2006. The
opposite party places reliance on Rule 21(2) of the West Bengal Co‐operative Societies Rules,
2011, which stipulates that at a special general meeting, no business other than that specified in
the relevant notice shall be considered. The resolution proposed and passed in the special
general meeting dated January 15, 2006, according to the opposite party, did not formulate any
proposal as to construction of the administrative building, let alone in detail or with
transparency. It only authorized the board of directors to take further action, such as erection of
hoardings etc., for further development/utilization of the premises in question and did not
touch the issue of construction of the administrative building at all.
12. It was further submitted that the letter from the Joint Registrar, Co‐operative
Societies (Housing), intimating that no formal permission was required for building the office‐
cum‐administrative building of the petitioner no. 1‐Society, was issued entirely on the basis of
the project submitted by the Society itself to the Registrar. It was indicated from the said project
profile, that it gave an impression that no new project or joint venture was being entered into
but the proposed project was a continuation of the previous agreement with M/s Hi‐Rise with
minor modifications. In the event the Society had presented the real picture by entering into a
new project upon cancellation of the previous one with M/s Hi‐Rise, the Registrar would
definitely have insisted on permission / approval to do so. In this context, the opposite party
relies on the provisions of Rule 145(2) of the West Bengal Co‐operative Societies Rules, 2011,
which stipulate that no primary housing co‐operative society shall make any change in the
project or the project site without the approval of the general body with three‐fourths majority
and prior approval of the Registrar.
13. According to the opposite party, neither was obtained by the petitioner no. 1 Society
before proceeding with the previous project with cosmetic modifications.
14. It was lastly argued by the opposite party that the petitioners were attempting to
defeat the very spirit of the co‐operative principle, as reflected in the preamble of the West
Bengal Co‐operative Societies Act, 2006. The co‐operative movement, according to the opposite
party, comprises joint participation of all members and aspires to give a healthy impetus to self
help and mutual aid. As such, the endeavour of the petitioners to enter into development
agreements with external, commercial developers would defeat the very purpose of the
movement. Such efforts, to gain profit for the sake of it, is an anti‐thesis to the spirit of the co‐
operative movement.
15. The opposite party cited the following judgments in support of the proposition that
the supervisory jurisdiction of this Court under Article 227 of the Constitution of India is very
limited:
i) AIR 1984 SC 38 [Mohd. Yunus vs. Mohd. Mustaqim and others];
ii) AIR 2000 SC 3495 [Khimji Vidhu vs. Premier High School];
iii) AIR 2003 SC 3044 [Surya Dev Rai vs. Ram Chander Rai and others];
iv) (2010) 8 SCC 329 [Shalini Shyam Shetty and another vs. Rajendra Shankar Patil].
16. Upon consideration of the arguments of both sides and the materials on record, it
appears that the special general meeting held on January 15, 2006, did not, at all, comply with
the second component of the arbitral award dated December 21, 2004. The resolution proposed
and passed in such meeting was as follows:
1." Be it resolved that the Board is hereby empowered to take all necessary steps to construct the market without delay, while keeping in mind of maximum benefit to the Society and it's members; total control of the Society over the premises in accordance with Acts, Rules, Bye Laws and Co‐operative Principles. The proposed complex will be of market‐cum‐commercial nature and the Society will complete the project on its own, whereby no Promoter will be appointed.
The Board is further directed to take all necessary steps to prepare a comprehensive project report by 31st March, 2006, covering minute details of each & every parameter of the project like cost of project, cash flow, revenue from the project, mode of finance etc and circulate a report amongst the members, which will be considered by the General Body at the Annual General Meeting scheduled to be held in April, 2006.
This resolution supersedes all previous resolutions of the General Body and / or the Board with regard to the development of the market."
2. "Be it resolved that the contract executed by and between the Society and M/s Hi‐Rise Apartment Makers Pvt. Ltd., including the work order issued by the Society are to be treated as revoked and cancelled. The Board of Directors is directed to refund the security deposit to the said company, after deducting necessary penalties and dues in terms of the said contract.
The house further resolved that in super cessation of all earlier resolutions of the general body as well as Board of Directors in connection with the Administrative Building, the Board of Directors is hereby authorised to take all further necessary action such as erection of hoardings etc., for further development/utilization of the said premises for the best interest of the Society and it's members, except letting out, long term in nature under tenancy act."
17. Such resolution did not deal with the issue of constructing the administrative building of the Society at all. The Board of Directors were vaguely authorized to take "all further necessary action such as erection of hoardings etc. for further development/utilization of the said premises for the best interest of the Society and its members, except letting out, long term in nature, under the tenancy act". As such, the specific direction in the award to discuss the issue in every detail with transparency at every stage being observed to the full, was blatantly violated.
18. This apart, the project which was submitted to the Registrar of Co‐operative Societies for approval was, on the face of it, a clear indication of violation of the arbitral award. The impression carried by such project was obviously that the previous joint venture with M/s Hi‐ Rise would continue with certain cosmetic modifications, which was entirely against the letter and spirit of the award.
19. Instead of restraining itself from taking any step towards demolishing the existing construction of the administrative building as part of a joint venture with M/s Hi‐Rise, as directed categorically in the award, the petitioners proceeded merrily with the eye‐wash exercise of making certain innocuous modifications to the original joint venture agreement with M/s Hi‐Rise and were bold enough to mislead the Registrar of Co‐operative Societies to indicate that no permission was necessary from that end for such continuation of construction.
20. In the event a new project was to be entered into in terms of the arbitral award, Rule 145(2) of the 2011 Rules, corresponding to Rule 149(11) of the 1987 Rules, would definitely mandate an approval from the Registrar. As such, the exercise carried out by the petitioners to pay lip‐service to the terms of the award and entirely misleading the Registrar was, in fact, deplorable.
21. In this context, the opposite party rightly pointed out that the petitioners violated the spirit of the co‐operative movement, as encapsulated in the preamble of the West Bengal Co‐ operative Societies Act, 2006. Such preamble is as follows:
"An Act to consolidate and amend the law relating to Co‐operative societies in West Bengal. WHEREAS in order to infuse a new life into the co‐operative movement of West Bengal on the face of the new challenge of globalisation and liberalization of Indian Economy, it is necessary and expedient to make provisions to give healthy impetus and a sense of purpose for the co‐operative movement in West Bengal, to facilitate the voluntary formation and democratic functioning of the co‐ operative societies in the State, to ensure membersʹ involvement in making decisions, to make the co‐ operative societies self‐reliant and vibrant by changing the vision and mission of the institutions as required to face a new competitive economic scenario to promote thrift, self‐help and mutual aid amongst the people with needs and interest in common, to provide for transparent, devoted and efficient management and services relevant to the needs of the co‐operatives, to diversify their activities, to put them on sound financial footing and to increase production in all sectors of life including agriculture and industry and above all to bring about economic and social regeneration including better and happier conditions of living for the weaker and poorer section of the community including womenfolk and to bring them within the fold of co‐operative movement and for that purpose to consolidate and amend the law relating to the co‐operative societies in West Bengal."
22. Section 88(a) of the said Act contemplates that members of a housing co‐operative society may construct their house either on their own or through the co‐operative society.
23. Again, Section 89(e) of the said Act envisages that the first board of the housing co‐ operative society shall call the first general meeting of the society for the purposes of inter alia appointing architects, contractors and valuers, provided that such appointment shall be made after inviting application for the same through a daily newspaper, if applicable, and that no person acting as an architect or contractor or valuer shall act as any of the other two.
24. This apart, Rule 135(a) of the 2011 Rules provides that the board of a housing co‐ operative society has the power to appoint, suspend, remove or discharge all persons engaged on payment of fees or on the basis of contract, such as contractors, solicitors, supervisors, engineers, valuers, architects and surveyors.
25. It is seen that nowhere in the Act or the Rules, the delegation of construction work to third party developers, having commercial interest, is contemplated.
26. The entire spirit of the co‐operative movement, being that of participation of the members for their own good, was missed out in the commercial endeavour of the petitioners to earn quick profits at the expense of the co‐operative spirit.
27. The arguments of the petitioners, that the first component of the arbitral award becomes academic upon fulfillment of the second, is also not acceptable, since the first component is a continuous restraint, independent of the second. The petitioners have, in any event, flouted both the components of the award by posing to cancel the previous agreement with M/s Hi‐Rise and renewing the same agreement in a superficially changed format. The continuation of the earlier joint venture has also been reflected from the project submitted by the petitioners before the Registrar, Co‐operative Societies, purporting to seek approval.
28. The petitioners also rely on an annual report of an Annual General Meeting held by the petitioner no. 1‐Society on May 27, 2007, to impress upon this Court that the award was complied with by the Society in spirit.
29. However, apart from the fact that the award contemplated not an Annual General Meeting but a Special General Meeting, the report itself belies the impression sought to be created by the petitioners. It is reflected from the report that the Board of Directors, even in the teeth of the award, did not even consider any other option than to renew the previous agreement with M/s Hi‐Rise itself, despite the specific restraint order comprised in the first component of the arbitral award. The project entered into, as reflected from the annual report itself, contemplated only modification of terms of the previous joint venture agreement, and blatantly exhibited the sole purpose of such project to gain merely Rs. 20 million (by virtue of enhancement of the market value of the project being fully commercial). As such, although commerce ipso facto need not be deprecated, the tenor of the arbitral award as well as the spirit of the co‐operative movement, as contemplated in the West Bengal Co‐operative Societies Act, 2006, was taken for a ride by such acts of the petitioners. The resolution taken in such Annual General Meeting was an iteration of the absence of will on the part of the petitioners to comply with the award and the deliberate attempt to carry on with old wine in a new bottle, having the shape of a new‐look agreement.
30. As such, it appears that although the impugned order was a bit on the miserly side as far as reasons are concerned, the conclusion arrived at in the said order, as to the execution case being still maintainable in view of non‐satisfaction of the arbitral award, was valid.
31. As to the judgments cited by the opposite party on the scope of interference under Article 227 of the Constitution of India, this Court is of the opinion that the principles laid down therein are well‐settled. Since no patent jurisdictional error is found in the impugned order, in any event, the said judgments need not be gone into in detail.
32. In the aforesaid circumstances, the impugned order does not deserve interference under Article 227 of the Constitution of India.
33. Accordingly, C.O. No. 2714 of 2014 is dismissed on contest, without any order as to costs.
( Sabyasachi Bhattacharyya, J. )