Gujarat High Court
For Approval And Signature vs State Of Gujarat & on 30 November, 2015
Author: K.M.Thaker
Bench: K.M.Thaker
C/SCA/16563/2014 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 16563 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE K.M.THAKER Sd/-
1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of No
the judgment ?
4 Whether this case involves a substantial question of No
law as to the interpretation of the Constitution of
India or any order made thereunder ?
KALOL NAGARIK SAHAKARI BANK LTD....Petitioner(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
Appearance:
MR BAIJU JOSHI, ADVOCATE for the Petitioner(s) No. 1
MS SHRUTI PATHAK AGP for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 1 - 2
CORAM: HONOURABLE MR.JUSTICE K.M.THAKER
Date : 30/11/2015
CAV JUDGMENT
The petitioner, a cooperative bank, has invoked Article 14 and Article 226 of the Constitution of India and taken out present petition. By present petition, the petitioner - bank has challenged the orders dated 20.10.2014 Page 1 HC-NIC Page 1 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT and 27.10.2014 passed by the District Registrar, Cooperative Department.
1.1 By the said instructions/orders dated 20.10.2014 and 27.10.2014, the respondent No.2 - District Registrar, has instructed the petitioner
- bank to initiate appropriate criminal proceedings against the persons, who, upon proper inquiry and investigation, are prima facie, found to be involved in the alleged irregularities, including financial irregularities.
2. From a glance at the said communications / orders dated 20.10.2014 and 27.10.2014, it emerges that after examining the complaint received by his office and after considering the bank's reply and the material supplied by the bank, the District Registrar, prima facie, found involvement of erstwhile Chairman Mr. N.K.Patel and his son Mr. Amit Patel and his other family members as well as Managing Director of the petitioner bank other office bearers and employees including Branch Manager Mr. Bhatt and some office bearers and employees of the petitioner bank in respect of various irregularities, including financial irregularities, more particularly in respect of the transactions related to M/s. Sun Retail Pvt. Ltd, Alpesh Traders, Devika proteins Pvt. Ltd.
Page 2 HC-NIC Page 2 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT etc. and upon having prima facie noticed such irregularities, the District Registrar instructed the petitioner bank, vide above referred communications / instructions dated 20.10.2014 and 27.10.2014 to initiate appropriate criminal proceedings against the responsible persons, who may be found, upon proper inquiry / investigation in the matter, involved in the matter.
2.1 Thus, factually the real and actual effect of the instructions would fall on and affect the said persons. However, somehow, it is the petitioner - bank who feels aggrieved by such instructions.
3. It is pertinent that from the submissions by learned advocate for the petitioner and from the contentions raised in the petition, it has emerged that the petitioner - bank is reluctant to follow, and comply, the instructions by District Registrar.
3.1 Differently put, the reluctance of the petitioner - bank translates into a situation which gives out that the petitioner - bank is reluctant to and wants to avoid initiation of the action against concerned persons and thereby it wants to shield and protect the concerned persons which may include erstwhile office bearers and/or Page 3 HC-NIC Page 3 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT employees of the petitioner bank.
4. So as to ascertain the scope and object of the petition and to ascertain the real object and purpose of present petition and/or the consequence if the petition is entertained and relief is granted, it would be appropriate to take into account the factual backdrop mentioned by the petitioner in light of which it has preferred present petition.
4.1 It appears that somewhere in September - 2014, a complaint came to be filed by one of the candidates who was contesting the election for the Board of Directors. The candidate submitted a complaint to the respondent No.2 - District Registrar.
4.2 It appears that by the said complaint, the complainant / candidate alleged commission of various irregularities by some persons including the office bearers and employees of the petitioner bank, including irregularities in respect of transactions involving M/s. Sun Retail Pvt. Ltd., Alpesh Traders, Devika Proteins Pvt. Ltd. and Impression Limited which were allegedly carried out during period around June-2010.
4.3 It appears that after having filed such Page 4 HC-NIC Page 4 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT complaint, somewhere in August, 2014, the said complainant / candidate filed another complaint or additional material with regard to the first complaint, on or around 12.9.2014 wherein the complainant / candidate referred to certain other transactions as well.
4.4 It further appears that upon receipt of the complaint, the District Registrar examined the matter and forwarded the said complaints dated 21.8.2014 and 12.9.2014 to the petitioner bank and sought reply / explanation from the petitioner bank.
4.5 It appears that the petitioner bank submitted its reply to the respondent No.2 - District Registrar.
4.6 What is pertinent is the fact that in its reply, the petitioner bank stated that one Mr. Kishor Bhatt, Branch Manager of the petitioner bank, was involved in or responsible for the irregularities and he had exceeded his powers and that he had even admitted the irregularities. With regard to the allegations related to the transactions between Alpesh Traders and M/s. Son Retail Pvt. Ltd., the petitioner bank has stated in the petition that:-
"f. The fact pertaining to transaction between Alpesh Traders and Sun Retail Pvt. Ltd. is that on Page 5 HC-NIC Page 5 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT 08.06.2010 and 17.06.2010, two cheques for an amount of Rs.30,00,000/- and Rs.25,00,000/- respectively were credited in the Account of M/s Alpesh Traders inspite of the fact that there was insufficient balance in the account of Drawer, i.e. M/s Sun Retail Pvt. Ltd. There was another transaction independent of above referred transaction carried on 30.06.2010 between Devika Proteins Pvt. Ltd. and M/s Sun Retail Pvt. Ltd. In this transaction, it is alleged that there was insufficient balance in the Account of Devika Proteins and still, credit was given in favour of Sun Retail Pvt. Ltd.
g. The said irregularities were noticed by Petitioner and Mr. Kishor Bhatt, the then Branch Manager was transferred and inquiry proceedings were initiated against him. The petitioner recovered full amount from Devika Proteins Pvt. Ltd. and also recovered interest firstly @ 10% being interest rate for branch transfer interest being Rs.1,05,890/- and thereafter, further interest @ 14/25%, being interest rate for the advances of the Petitioner was charged and recovered from Devika Proteins Pvt. Ltd. totaling Rs.1,92,220/-. Similarly, the penal interest was also recovered from Sun Retail Pvt. Ltd. being Rs.71,115/- and thus the Petitioner has suffered no financial loss arising out of alleged irregularities perpetrated by the Branch Manager."
4.7 It appears that after considering and examining the reply / explanation from the petitioner bank, the District Registrar reached to the conclusion that appropriate proceedings, including criminal proceedings, should be initiated against the person who, upon proper inquiry, may, prima facie, be found involved in the alleged irregularities.
4.8 Therefore, the respondent No.2 - District Registrar addressed the above referred Page 6 HC-NIC Page 6 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT communication dated 20.10.2014 and instructed the petitioner bank to inquire into the matter and after investigating relevant aspects, initiate criminal proceedings against the persons, who are prima facie found involved in the alleged irregularities.
4.9 It appears that somehow the petitioner bank is not inclined to investigate into the matter and / or initiate appropriate criminal proceedings against the persons who are prima facie found responsible for such irregularities. It also appears that the petitioner bank is not interested in protecting its own interest or interest of its members and does not want to take action against the culprits.
5. It is relevant to mention, at this stage, that the petitioner bank has accepted that none of the persons whose names are mentioned in the complaints and/or in the Registrar's letters have not raised any grievance or objection against the instruction by the respondent No.2 - District Registrar or they have not initiated any proceedings against the decision by the respondent No.2 - District Registrar to get the matter investigated by the bank and / or against the communications dated 20.10.2014 and 27.10.2014 instructing the bank to inquire into Page 7 HC-NIC Page 7 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT the matter and file criminal proceedings.
5.1 Thus, either the said persons are not aggrieved by the said direction and they do not have any objection against such instruction or they are conducting proxy litigation for which the bank is incurring the cost.
5.2 It is the petitioner - bank who has, for such purpose, invoked Article 14 of the Constitution of India, and taken recourse under Article 226 of the Constitution of India by resorting to writ remedy against the communication by the respondent No.2 - District Registrar.
6. In response to the notice by the Court, the respondent No.2 - District Registrar has filed affidavit. The respondent No.2 - District Registrar has mentioned the background on account of which the communications dated 20.10.2014 and 27.10.2014 came to be issued. The respondent No.2
- District Registrar has mentioned in the affidavit that:-
"7. It is submitted that by way of the impugned communication the office of the deponent has directed petitioner bank to initiate Criminal Proceedings against the erring office bearers. It is submitted that in view of fact that the petitioner bank being a body corporate as provided under section 37 of the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as the Act) gets prejudice if the Criminal Proceedings are initiated against the earring office bearers. It is submitted that the present Page 8 HC-NIC Page 8 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT petition is also liable to be dismissed on the ground of the availability of the alternative, efficacious and statutory remedy which is provided under Section 155 of the Act, 1961. It is submitted that it is now settled proposition of Law that where the statute itself has provided the forum for redressal of any grievance, the Hon'ble High Court under Article 226 of the constitution of India may not entertain such petitions.
8. It is submitted that the present petition is also required to be dismissed on the ground of suppression of facts as well as the petitioner bank has taken stands which are contrary to each other. It is submitted that the petitioner bank in its letter dated 02.09.2014, which is addressed to the General Manager, Reserve Bank of India has in clear terms. Admitted that there is a misappropriate of the tune of Rs.10,00,000/- has been committed where in Mr. Navinchandra K. Patel, who is the then chairman of the petitioner bank is the beneficiary of the said misappropriation. ... It is submitted that on 12.09.2014 the petitioner bank has also addressed the letter to the office of the deponent wherein it is clearly admitted that there is a misappropriate of Rs.55,00,000/- wherein one account holder namely Alpesh Traders is the beneficiary. .... At this juncture, I would like to pointed out one important aspect that the said letter dated 12.09.2014 is bearing signature of the then Chairman Managing Director and the General Manager. It is submitted that with the memorandum of the petition, the petitioner has annexed the copy of the letter dated 13.11.2014 and it also bears the signature of the managing Director of the Petitioner Bank. A perusal of the above mentioned two letters namely the letter dated 13.11.2014 and the letter dated 12.09.2014 reveals that the bank is taking contrary stand in such a serious matter of financial misappropriation and therefore, in my humble submissions, the petitioner bank shall be order to explain such a contrary stand which is taken before this Hon'ble Court.
9. It is submitted that now I would like to explain the fact that the then Chairman Shri Navinchandra Patel is the beneficiary of the above mentioned financial irregularity or to the tune of Rs.55,00,000/-. It is submitted that initially Page 9 HC-NIC Page 9 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT when the Alpesh Traders came to be constituted as the partnership firm there were four partners namely, (1) Patel Kantilal Keshalal, (2) Patel Pushpaben Navinbhai, (3) Patel Pannaben Natvarlal and (4) Patel Amit Navinbhai.
12. It is submitted that from the above facts, it is clelar that in Alpesh Traders, there is only one partner namely Patel Amitbhai Navinbhai and he also has executed the Power of Attorney in favour of the then Chairman of the petitioner bank namely Patel Navinbhai Kantibhai way back on 10.08.2001. It is submitted that as stated hereinabove the said misappropriate which has been admitted by the petitioner bank in its communication dated 02.09.2014 as well as 12.09.2014 from the said misappropriation the beneficiary is the Alpesh Traders and by virtue of the Power of Attorney, the then Chairman is prima facie responsible for such huge financial irregularity and misappropriation.
13. It is submitted that the said firm namely Alpesh Traders is also holding a licence from Agriculture Produce Market Committee, Kalol for a purpose of carrying out the trading activities. It is submitted that a copy of the licences which are issued in favour of the Alpesh Traders by the Agricultural Produce Market Committee, Kalol from the year 2009 to 2010, 2010 - 2011, 2011-2012. ... It is submitted that a perusal of Market Licence makes it clear that the then chairman of the petitioner bank namely Patel Navinbhai Kantibhai is named as an authorised person on behalf of the Alpesh Traders as well as he is the person who has applied for the license on behalf of Alpesh Traders.
14. It is submitted that from the above facts and the letters dated 02.09.2014 and 12.09.2014 issued by the petitioner bank, it is clear that the then chairman of the petitioner bank namely Patel Navin Kantilal has prima facie committed irregularities and thereby has committed fraud with the petitioner bank misusing his office as the Chairman of the petitioner Bank. It is submitted that when the petitioner bank itself has admitted that irregularities and misappropriation have been committed, and the head of the department of deponent vide communication dated 15.10.2014 has Page 10 HC-NIC Page 10 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT directed the office of the deponent to direct the petitioner bank to initiate criminal proceedings against the erring office bearers. ...
15. It is submitted that at this juncture I would also like to point out that in pursuance to the impugned communication, the petitioner bank vide resolution dated 03.11.2014 has already authorized its General Manager Shri Prahlad G Patel, for filing of the appropriate proceedings. In view of the above in my humble submissions on one hand the petitioner bank has passed the Resolution to carry out the directions issued by the office of the deponent and on the other hand the petitioner bank is filing present petition. In view of the above my humble submission the petitioner bank is taking a contrary stand which is not in the best interest of its shareholders bank.
16. It is submitted that with the memo of the petition at ANNEXURE E the petitioner bank has annexed the communication dated 13.11.2014 addressed to the office of the deponent, whereby the petitioner bank has informed the office of the deponent that the said amount which was misappropriated, has been now deposited with interest. It is submitted that this fact clearly reveals that there was financial misappropriation at the behest of the then chairman of the petitioner bank and therefore office of the deponent has rightly directed the petitioner bank to file an appropriate criminal proceedings against the erring office bearers. In view of the above in my humble submission the present petition is required to be dismissed in the interest of justice and equity."
6.1 From the details mentioned in the said reply, which are based on the reply and documents submitted by the petitioner bank, it emerges that, as such, the petitioner bank has admitted that certain irregularities were committed at the relevant time.
Page 11 HC-NIC Page 11 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT 6.2 On this count, it is relevant to note that the District Registrar, has on the basis of the petitioner bank's reply and the material supplied by the petitioner bank, stated, inter alia, that "It is submitted that the petitioner bank in its letter dated 2.9.2014 which is addressed to the General Manager Reserve Bank of India has in clear terms admitted that there is misappropriation of the tune of Rs.10,00,000/- has been admitted wherein Mr. Navinchandra K. Patel who is the then chairman of the petitioner bank is the beneficiary of the said misappropriation."
6.3 The District Registrar has also mentioned, in light of the details mentioned by the petitioner bank that "it is submitted that on 12.9.2014, the petitioner bank has also addressed a letter to the office of the deponent wherein it is clearly admitted that there is misappropriation of Rs.55,00,000/- wherein one account holder namely Alpesh Traders is the beneficiary."
6.4 From the said facts mentioned by the District Registrar in the affidavit dated 26.11.2014, it becomes clear that the said details are mentioned in the affidavit in light of the petitioner bank itself mentioned in its reply.
Page 12 HC-NIC Page 12 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT 6.5 From the reply affidavit by the District Registrar, it has also emerged that prima facie the Chairman of the petitioner bank is found to be beneficiary of the financial irregularity to the tune of Rs.55,00,000/-.
6.6 Further from the said reply affidavit dated 26.11.2014 by the District Registrar, it has also emerged that the petitioner bank informed the District Registrar that substantial part of the misappropriated amount has been deposited.
6.7 In view of such information by the petitioner bank to the District Registrar, the respondent No.2 - District Registrar has claimed that the said declaration by the petitioner bank establishes misappropriation and financial irregularities.
7. In the affidavit dated 26.11.2014, the respondent No.2 - District Registrar has further stated that:-
"19. It is submitted that in the present case, when the petitioner bank itself in its communication dated 02.09.2014, which is addressed to the General Manager, Reserve Bank of India and in the communication dated 12.09.2014 which is addressed to the office of the deponent, has in clear terms admitted that the misappropriation has been committed and beneficiary of the said misappropriation is the then Chairman of the petitioner bank. In my humble submission, when the petitioner bank itself has admitted this position holding of inquiry under Section 86 would be of no use and therefore, the authorities have rightly Page 13 HC-NIC Page 13 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT directed the petitioner bank to initiate criminal proceedings, so that a competent Criminal Court can decide the said issue. It is submitted that by the impugned communication and authorities though it fit to relegate the entire issue to be decided by the competent Criminal Court so that the erring office bearers can be suitably be punished."
7.1 From the details mentioned by the District Registrar in paragraph Nos.7 to 16 and 19 of the reply affidavit dated 26.11.2014 and from the details mentioned in the communication dated 20.10.2014, it becomes clear that the District Registrar has issued instructions after examining the complaint as well as relevant record / material available to him and reply / explanation by the petitioner bank.
Under the circumstances, action of the respondent No.2 - District Registrar cannot be said to be without application of mind or arbitrary or baseless or unjust.
7.2 The respondent No.2 - District Registrar has clarified in his affidavit that having noticed the said aspects, it was considered appropriate and necessary to instruct the petitioner - bank to initiate appropriate steps / actions against the erstwhile office bearers / employees of the petitioner - bank and that therefore, the communication dated 20.10.2014 and 27.10.2014 was issued. It appears that since despite such facts, the petitioner bank did not initiate any action against the concerned and responsible persons, Page 14 HC-NIC Page 14 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT the respondent No.2 issued the impugned instructions.
7.3 The respondent No.2 - District Registrar has also mentioned and emphasized in his affidavit that the respondent authority has no malafide intention against the petitioner - bank or against its erstwhile office bears / employees of the petitioner - bank.
7.4 The petitioner - bank has opposed the said details by filing rejoinder affidavit.
8. In this background, Mr. Joshi, learned advocate for the petitioner - bank, submitted that the impugned instructions by the respondent No.2 - District Registrar is illegal, arbitrary and without authority in law. He submitted that without conducting any inquiry, the respondent No.2 - District Registrar has directed the petitioner - bank to initiate actions against the erstwhile office bears and employees of the petitioner - bank. Learned advocate for the petitioner further submitted that there is no material or evidence to justify the directions issued by the respondent No.2 - District Registrar. He further submitted that the respondent No.2 - District Registrar has proceeded on presumptions and conjunctures and Page 15 HC-NIC Page 15 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT has ignored that after 2006-2007, the petitioner
- bank has undergone statutory audit and that therefore, there is no base or justification for such directions. He also submitted that without initiating or conducting any inquiry under Section 86 or under Section 93 of the Act, the respondent No.2 - District Registrar cannot issue directions for actions against the office bearers and employees of the cooperative society and that therefore also, the impugned communication is bad in law and unsustainable.
8.1 Learned AGP opposed the submissions by learned advocate for the petitioner. Learned AGP submitted that the petition is not maintainable and the petitioner has no locus to prefer the petition against the instruction and that the respondent No.2 - District Registrar has found prima facie material justifying and warranting initiation of appropriate steps against the erstwhile office bearers and employees of the petitioner - bank and that therefore, the respondent No.2 - District Registrar issued instructions which are impugned in the petition. According to learned AGP, in view of the reason and object behind the said instructions, the grievance and objection of the petitioner - bank is not justified and is not sustainable. Learned AGP also submitted that the instructions issued Page 16 HC-NIC Page 16 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT by the respondent No.2 vide communication dated 20.10.2014 and 27.10.2014 does not adversely affect the petitioner - bank or its interest. Learned AGP requested that the petition may not be entertained and may be dismissed. He also submitted that statutory alternative remedy is available to the petitioner under Section 155 of the Act.
9. I have heard and considered the submissions by learned advocate for the petitioner and learned AGP for the respondent.
10. From the said communications dated 20.10.2014 and 27.10.2014, it appears that after receiving the complaint, the respondent No.2 - District Registrar had called for reply / explanation from the petitioner - bank. The petitioner - bank had submitted its explanation and report.
10.1 The respondent No.2 - District Registrar appears to have considered the said explanation / report. The impugned communication dated 20.10.2014 and 27.10.2014 are issued thereafter.
10.2 A glance at the communication dated 20.10.2014 and 27.10.2014 issued by the respondent No.2 - District Registrar also brings out that the District Registrar has not proceeded Page 17 HC-NIC Page 17 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT merely on the basis of the complaint but before issuing said instruction, the Registrar examined the complaint / allegations and also called for and considered the Bank's reply and he issued the said communication after taking into account the reply / explanation submitted by the petitioner - bank and did not act only on the complaint submitted by the complainant.
10.3 The items and the details or material mentioned in the communications dated 20.10.2014 and 27.10.2014 are not drawn from any flight of imagination but they appear to have been gathered from the reply / report submitted by the petitioner - bank.
10.4 Meaning thereby, it cannot be said that the respondent No.2 - District Registrar has acted without application of mind or without satisfying himself about the requirement for proper investigation and inquiry into the matter raised pursuant to or in light of the complaint received by his office.
11. When such facts and circumstances have emerged from the record, more particularly from the reply and documents submitted by the petitioner bank, then, the instructions issued by the respondent No.2 - District Registrar asking Page 18 HC-NIC Page 18 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT the petitioner bank to inquire into the matter and investigate the facts and to initiate criminal proceedings against the persons who are prima facie found involved in the financial irregularities, cannot be said to be illegal or arbitrary or without authority of law.
11.1 Actually, when such facts and circumstances have emerged, then, it follows that upon having been informed about the irregularities, the petitioner bank ought to have acted on its own and should have further inquired into the matter and should have initiated appropriate proceedings against the persons who are prima facie found to be involved in the alleged transactions and irregularities.
11.2 Instead, surprisingly, the petitioner bank has come out with present petition and challenged the instructions by the respondent No.2 - District Registrar and thereby exhibited its reluctance to initiate any proceedings against the erstwhile office bearers and employees of the petitioner bank.
12. It is pertinent that the complaint received by the office of District Registrar raises allegations with regard to various irregularities, including financial Page 19 HC-NIC Page 19 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT irregularities, in the conduct of business and affairs of the petitioner - bank.
12.1 These aspects touch and affect the interest of hundred of members of the petitioner - bank as well as their trust and faith in the functioning and conduct of the affairs and business of the petitioner - bank.
12.2 Therefore, the concern of the registrar cannot be said to be misplaced or irrelevant or unwarranted or arbitrary.
13. According to the provision under the Gujarat Cooperative Societies Act, 1961, the respondent No.2 - District Registrar is statutorily obliged to supervise the conduct of business and affairs of the cooperative society and to cause inspection, to cause audit and to take steps to ensure that the administration and management of the cooperative society is run in accordance with law and the requirement prescribed by the Act are complied and to ensure that interest of members of the society are not adversely affected and to take all necessary steps to stop any and all irregularities in the conduct of business and affairs of the cooperative societies.
14. When the complaint received by his office and Page 20 HC-NIC Page 20 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT the impugned communication are examined in light of the provision under the Act and in view of the duties of the District Registrar as well as the facts and details which emerges from the reply submitted by the petitioner to the respondent No.2, then, it becomes clear that the action of the respondent No.2 - District Registrar cannot be said to be arbitrary or illegal or without authority of law.
14.1 Actually, a question which is not answered - or rather which is avoided - by learned advocate for the petitioner is that why the petitioner - bank feels shy and reluctant in complying the direction and why the Bank is so keen to shield and protect the concerned persons of the petitioner - bank against whom the respondent No.2 - District Registrar has asked the petitioner to take appropriate actions / steps in accordance with law and file criminal proceedings, more particularly when the concerned person themselves have not initiated any action against such instruction by the respondent No.2 Registrar.
14.2 Moreover, the petitioner bank has failed to explain and establish the ground, reason and object for its objection despite the possibility that the inquiry would prove to be in Bank's Page 21 HC-NIC Page 21 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT interest and in the interest of its shareholders. More so when said and concerned persons themselves have not taken any action.
14.3 As mentioned earlier, the said persons themselves have not raised any objection with reference to or against the instructions issued by the respondent No.2 - District Registrar vide communications dated 20.10.2014 and 27.10.2014.
14.4 Despite this, it is the petitioner - bank who has taken out the petition and challenged the communications dated 20.10.2014 and 27.10.2014.
15. The petition, therefore, appears to be a proxy litigation.
15.1 The petitioner - bank appears to be acting at the behest of the concerned persons and it is actually and in effect and substance, protecting the persons involved in the alleged transactions and/or the persons whose names are mentioned in the complaint and in the Registrar's letters including erstwhile office bearers and employees.
15.2 Not only this, but for the said and such purpose, the fund and money of the petitioner - bank (i.e. the amount which actually belongs to the members of the society) is being spent by the Page 22 HC-NIC Page 22 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT petitioner - bank. Differently put, for protecting concerned persons the petitioner - bank is incurring expenditure out of the fund of the petitioner - bank / its members and the said erstwhile office bearers and employees of the petitioner - bank are indirectly and at the expenditure incurred by the Bank contesting the communication and instructions issued by the respondent No.2 - District Registrar and for protecting their interest the Bank is using money/funds of members.
15.3 The petitioner - bank is a front and the concerned persons including the erstwhile office bearers of the petitioner bank are hiding behind such front.
16. If the instructions issued by the District Registrar are followed and complied then it will be the persons involved in such transactions who would be actually affected persons and ultimately interest of the petitioner bank, more particularly of its members, will be protected.
16.1 Besides this, any prejudice will not be caused to the Bank if the instructions are complied. Even the Bank has failed to establish that prejudice will be caused to it if it complied the directions and it has also failed to Page 23 HC-NIC Page 23 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT establish how, if any, prejudice will be caused.
17. In such circumstances, ordinarily, the petitioner - bank could not and should not have any objection in complying the directions issued by the respondent No.2 - District Registrar.
17.1 It is pertinent that when in its reply / explanation to the respondent No.2 - District Registrar, (according to the affidavit of the District Registrar) the petitioner bank itself admitted commission of financial irregularities, then, there should not be any objection from the Bank against the directions by the Registrar. In face of such facts the reluctance or objection now raised by the petitioner bank is incomprehensible and is not palatable.
17.2 When it is prima facie found that certain erstwhile office bearers and employees of the petitioner bank might be involved in the financial irregularities and related transactions, then, there cannot be any valid or strong reason or justification for opposing the instructions issued by the respondent No.2 - District Registrar vide his impugned communication.
17.3 The action of the petitioner bank, more Page 24 HC-NIC Page 24 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT particularly the action of preferring present petition by invoking extraordinary jurisdiction of this Court under Article 226 of the Constitution of India and that too for protecting the persons who might be involved in financial irregularities and related transactions which ultimately adversely affect and hurt the interest of the bank and its members is not justified and such action by the petitioner bank does not deserve to be and cannot be entertained.
17.4 The action of the petitioner bank of taking out present petition and opposing the instructions by the respondent No.2 - District Registrar amounts to shielding and protecting the persons who might be responsible for and / or involved in the irregularities.
17.5 Moreover, for such purpose, the petitioner bank is incurring expenditure out of the fund of the petitioner bank i.e. money which belongs to the members of the petitioner bank. This proxy litigation, at the expenses of the bank, is undertaken to oppose the instructions by the District Registrar with a view to and/or at the behest of the alleged culprits inasmuch as the relief prayed for by the petitioner - bank will actually, and in effect and substance, help and protect the concerned and responsible persons.
Page 25 HC-NIC Page 25 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT Such action does not deserve to be entertained.
18. It is pertinent to note that the respondent No.2 has not acted mechanically or arbitrarily while issuing the instruction - communications dated 20.10.2014 and 27.10.2014. The respondent No.2 has also not acted merely on the complaint by a candidate or immediately on receiving the complaint. Before issuing the instruction - communications dated 20.10.2014 and 27.10.2014, the respondent No.2 had examined the complainant, called for response - details - explanation from the petitioner bank and considered its reply. Actually, some details (which seems to have persuaded the Registrar to ask the petitioner to initiate inquiry) appear to have been gathered - considered by the registrar from the said replies.
18.1 In light of the facts of the case and in view of the above discussed reasons the objection by the bank is neither justified nor sustainable. The Bank is acting and trying to protect interest of such persons against whom the bank is asked to initiate legal action and for such purpose the Bank is incurring expenditure from the funds of the members of the Bank.
19. The instruction or direction which is Page 26 HC-NIC Page 26 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT impugned in present petition is administrative in nature and is issued by statutory authority in exercise of administrative and supervisory authority conferred on the authority by the Act. When such action or direction or instruction are brought under challenge then they can be examined and tested and can be interfered with by the Court if they fail the test of reasonableness i.e. if they are found to be arbitrary and unjust or if they are found to be beyond the authority conferred by law. In present case, from the material on record and after examining the impugned instructions and affidavits and rival submissions and foregoing discussion, it has emerged that:-
[a] the impugned instructions are not issued mechanically merely on receipt of the complaint;
[b] the impugned instructions are issued after calling for petitioner's reply and after considering the allegations and the petitioner's reply and the material placed before the Registrar and after being satisfied about the justification and need for such instruction;
[c] the impugned instructions are not issued with undue haste or arbitrarily or without application of mind to relevant aspect; [d] the impugned instructions are not issued Page 27 HC-NIC Page 27 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT without authority of law;
[e] the impugned instructions are not illegal or unjust;
[f] the impugned instructions do not adversely affect the interest of the bank and if the impugned instructions are complied then the affected party would be concerned persons;
[g] the concerned persons have not initiated proceedings against the instructions; [h] this proceedings is proxy litigation and at the cost and expense of the funds of the Bank and its members and the petitioner is providing protective buffer to the concerned persons (who are erstwhile office bearers and managerial cadre employees of the Bank);
[i] the Bank has failed to explain, establish and justify the ground/s, reason/s and object, if any, for its objection despite the fact that ultimately interest of the members will be served and protected; [j] the petitioner has failed to establish
(i) any legal injury if the instructions by statutory authority are complied, (ii) any adverse effect to its interest, i.e. how the instructions are adverse to the interest of the Bank and / or its members viz. account holders and/or (iii) how is it affected party;
Page 28 HC-NIC Page 28 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT [k] besides this, statutory alternative remedy is available to the petitioner. Having regard to the above mentioned features of this petition, the Court is of the view that there is no justification to exercise writ jurisdiction in respect of this petition.
20. In light of such facts and circumstances, the reluctance and protest of the petitioner bank to initiate proceedings and its objection against the instructions by the respondent No.2 - District Registrar, does not justify invocation of prerogative and discretionary jurisdiction of this Court and that therefore, exercise of prerogative and discretionary jurisdiction would not be proper or justified.
20.1 When prerogative and discretionary writ jurisdiction of this Court is urged for such purpose, then, in such circumstances and facts, this Court is neither convinced to nor inclined to exercise discretion in accepting the bank's request to quash the instruction by the Registrar which would result into benefit to the concerned persons who will be spared from facing trial by Court. The Court is, therefore, justified in declining to exercise discretion and prerogative writ jurisdiction.
Page 29 HC-NIC Page 29 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT 20.2 When the litigant invokes writ remedy available under Article 226 of the Constitution of India for shielding or protecting other persons who themselves do not come forward and do not take measures in accordance with law despite being affected party and/or who indulge in proxy litigation, then, the Court would be justified in declining to entertain such petition and refusing to exercise discretionary jurisdiction, more so when the instruction in question does not affect interest of the Bank in any manner and the instruction does not appear to be illegal or arbitrary or without authority of law.
20.3 Besides this, when the Court finds that the litigation is proxy litigation and the object or purpose of the litigation does not appear to be genuine and / or bonafide and when the petitioner has failed to establish how it would be prejudiced if it complied the directions by statutory authority, then, in such circumstances also, the Court would be justified in refusing to exercise discretionary and prerogative jurisdiction.
20.4 Such blatant refusal, at the threshold, by the bank to comply the instructions issued by the District Registrar and that too for the purpose of protecting the persons who might be involved Page 30 HC-NIC Page 30 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT in the transactions erstwhile office bearers and employees is not only unpalatable and incomprehensible but is also unjustified and does not deserve to be entertained.
20.5The communication by the respondent No.2 which is impugned by the petitioner - bank does not affect, much less hurt, the interest of the petitioner - bank in any manner.
20.6 As mentioned earlier, the impugned instruction are not illegal or arbitrary or without authority in law. They are not issued mechanically and without application of mind. The petitioner has failed to establish that the instruction issued by the respondent No.2 is arbitrary or biased or illegal or without authority in law. Any ground for invoking Article 226 and Article 14 of Constitution of India - justifying invocation of Article 14 of the Constitution of India is not made out.
21. In this view of the matter and having regard to the facts of the case and for the foregoing reasons, the Court is not inclined to entertain the petition and / or to exercise prerogative and discretionary jurisdiction and/or to issue the directions as prayed for by the petitioner bank.
Page 31 HC-NIC Page 31 of 32 Created On Wed Dec 02 01:21:07 IST 2015 C/SCA/16563/2014 CAV JUDGMENT Therefore, the petition is not accepted and is hereby rejected. Interim relief stands vacated forthwith.
Mr.Joshi, learned counsel for the petitioner requested that interim relief granted vide order dated 14.11.2014 may be continued for some time to enable the petitioner to prefer appeal.
Mr.Jani, learned Additional Advocate General, submitted that as such there is no need to continue the interim relief, however, if considered fit, the Court may pass appropriate order.
Having regard to the said submission by learned counsel, it is clarified that interim relief granted earlier, will continue for further two weeks.
Sd/-
(K.M.THAKER, J.) kdc Page 32 HC-NIC Page 32 of 32 Created On Wed Dec 02 01:21:07 IST 2015