Gujarat High Court
Natvarbhai Pirambardas Patel vs Navinchandra Jagjivandas Patel on 23 January, 2020
Equivalent citations: AIRONLINE 2020 GUJ 153
Author: Vikram Nath
Bench: Vikram Nath, A.J. Shastri
C/LPA/1664/2019 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 1664 of 2019
In R/SPECIAL CIVIL APPLICATION NO. 224 of 2019
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2019
In R/LETTERS PATENT APPEAL NO. 1664 of 2019
With
R/LETTERS PATENT APPEAL NO. 1665 of 2019
In
SPECIAL CIVIL APPLICATION NO. 97 of 2016
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2019
In R/LETTERS PATENT APPEAL NO. 1665 of 2019
In SPECIAL CIVIL APPLICATION NO. 97 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH Sd/-
and
HONOURABLE MR.JUSTICE A.J. SHASTRI Sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed to Yes see the judgment ?
2 To be referred to the Reporter or not ? Yes 3 Whether their Lordships wish to see the fair copy of the No judgment ?
4 Whether this case involves a substantial question of law No as to the interpretation of the Constitution of India or any order made thereunder ?
========================================================== NATVARBHAI PIRAMBARDAS PATEL Versus NAVINCHANDRA JAGJIVANDAS PATEL ========================================================== Page 1 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Appearance:
LETTERS PATENT APPEAL NO. 1664 of 2019 MR BB NAIK, SENIOR COUNSEL WITH MR DIPEN DESAI for the Appellant MR JAL UNWALA, SENIOR COUNSEL with MR BAIJU JOSHI for Respondent No.1 MR KAMAL TRIVEDI, ADVOCATE GENERAL WITH MR DM DEVNANI, ASSISTANT GOVERNMENT PLEADER for Respondent 2 MR BS PATEL, SENIOR ADVOCATE WITH MR CHIRAG B PATEL(3679) for the Respondent(s) No. 7 LETTERS PATENT APPEAL NO. 1665 of 2019 MR BB NAIK, SENIOR COUNSEL WITH MR DIPEN DESAI for Appellant 1-5 MR KAMAL TRIVEDI, ADVOCATE GENERAL WITH MR DM DEVNANI, ASSISTANT GOVERNMENT PLEADER for Respondent No.1 MR PERCY KAVINA, SENIOR COUNSEL with MR CB UPADHYAYA and MR KIRTAN H MISTRI for Respondent No.3-5 MR BS PATEL, SENIOR ADVOCATE WITH MR CHIRAG B PATEL(3679) for the Respondent(s) No. 8 ========================================================== CORAM: HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH and HONOURABLE MR.JUSTICE A.J. SHASTRI Date : 23/01/2020 COMMON CAV JUDGMENT (PER : HONOURABLE THE CHIEF JUSTICE MR. VIKRAM NATH)
1. It has been reported that there are more than 5,50,000 active Cooperative Societies in India. They engage in providing economic and social services to not only the neglected and downtrodden sections of the society currently living in rural India, but also cater to a myriad of sections that reside in urban areas. In the Indian context, the cooperatives have been in existence for more than 200 years now. Initially, they were set up to provide for the Page 2 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT economically weaker sections of the society but in due course, these cooperatives have grown by leaps and bounds and are not limited to providing houses and products, but are also effective in providing loans and advances.
2 The cooperatives have an autonomous and democratic setup enshrining the concepts of self-help, democracy, equality, mutual cooperation and solidarity.
Statutory recognition was first given to the cooperatives by promulgation of the Cooperative Credit Societies Act, 1904. Later on as incorporation, regulation and winding up of cooperative societies was provided for in Entry 32 of List II of the Seventh Schedule of the Constitution, it evolved into a State subject and every State framed its own laws. The Gujarat Cooperative Societies Act was enacted in 1961. 3 The present matter relates to the interpretation of various provisions of the 1961 Act pertaining to the election and term of the members; the Office Bearers of the Managing Committee; powers of the Custodian and lastly, the powers of the State Government in relation to a District Page 3 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Cooperative Bank.
4 Part IXB was inserted into the Constitution (relevant in the current matter are Articles 243ZH to Article 243ZT) vide The Constitution (Ninety-Seventh Amendment) Act, 2011, thereby, giving the cooperatives a constitutional status. Article 43B in Part IV (inserted by the same Act of 2011) of the Constitution mandates that it is the duty of the State to promote voluntary formation, autonomous functioning, democratic control and professional management of the cooperative societies. Under Part IXB of the Constitution along with the statutory provision contained in the 1961 Act, the State Government has been given control over the cooperatives. This control is, however, limited to a certain extent with the objective of avoiding interference or intrusion upon the autonomous character and the democratic setup of the cooperatives. However, simultaneously, it ensures that the cooperatives are not misused and abused by their managements on account of misconduct, corruption, etc. to the disadvantage of the society to which the cooperative caters. Page 4 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT 5 In recent times, it is observed that the State seeks to keep effective control over the cooperatives by misusing the powers given to it, thereby, completely affecting the very autonomous and democratic fabric of the cooperatives. The present case is a classic example where the election of a District Cooperative Bank has been largely affected on account of the State and its officers' undue interference and illegal support to a faction of a contesting group. This was done by the appointment of a Custodian (Government Servant) and the Custodian further appointed two professional members, while the State appointed one nominee under the various provisions of the 1961 Act to tilt the result of the election in favour of one group. As a result of the above, a dispute has been created, which has led to a series of litigation(s). The ultimate beneficiary of the dispute at hand has been the Custodian who has continued to manage and control the affairs of the Bank for more than four and a half years while keeping the elected body away from taking over charge.
Page 5 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT 6 The Mehsana District Central Cooperative Bank Limited, having its office at Rajmahal Road, Mehsana (hereinafter referred to as "the Bank"), is duly registered with the relevant authorities under relevant provisions of law and is also governed by the provisions of the Gujarat Cooperative Societies Act, 1961 (hereinafter referred to as "the 1961 Act").
7 Apparently, as the term of the Office Bearers and the elected members of the Bank was due to expire on 30.04.2015 and fresh elections could not be notified within the stipulated period, Custodian was appointed by the State Government on 13.04.2015. The appointment of the Custodian was challenged by way of Special Civil Application No.6065 of 2015, in which the learned Single Judge initially declined to grant interim relief. The said order was carried before the Division Bench by Letters Patent Appeal No.831 of 2015. The Letters Patent Appeal was allowed vide order dated 23/24.04.2015 and the appointment of the Custodian was quashed. The order in the Letters Patent Appeal was challenged before the Page 6 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Supreme Court by the State of Gujarat wherein the Supreme Court granted stay vide order dated 06.05.2015 and as such the Custodian has continued. Interim order dated 06.05.2015 passed by the Supreme Court is reproduced below.
"Taken on board.
Heard learned counsel for the petitioners and perused the relevant material.
Exemption from filing O.T. and c/c of the impugned order is granted.
Issue notice.
The Custodian appointed shall continue. List the matter after the ensuing summer vacation."
Factual matrix disclosed below would reflect that the Custodian is still continuing to manage the affairs of the Bank.
8. The elections for the post of members of the Committee of the Bank was scheduled for 19.11.2015. In the said elections the following 12 members were elected:
(1)Natwarlal Pitambardas Patel (2) Azabhai Dhanabhai Katariya (3) Pankajbhai Haribhai Patel (4) Ishwarbhai Jivabhai Patel (5) Daljibhai Ramjibhai Chaudhary (6) Page 7 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Dashrathbhai Jivandas Patel (7) Dashrathbhai Jethabhai Patel (8) Gaurangbhai Naranbhai Patel (9) Navinchandra Jagjivandas Patel (10) Vinodbhai Ranchhoddas Patel (11) Dahyabhai Pitambardas Patel and (12) Keshavlal Mafatlal Patel.
9. Later on 3 members viz. (1) Dipakbhai Prahladbhai Patel (2) Tusharbhai Natwarlal Patel and (3) Bhailalbhai Prabhudas Patel were elected unopposed on 27.11.2015 from the individual members constituency. Under the provisions of section 74(2) of the 1961 Act, there should be at least two professional members in the Committee of Central Co-operative Bank. If not elected then they could be co-opted by the Bank. In the present case, as amongst the elected members, none of them could be identified as professionals, the Custodian on 26.11.2015 appointed two professional members namely Amitaben Vipulbhai Shah and Babaldas Nagjibhai Patel.
10. Nine members elected on 19.11.2015, filed Special Civil Application No.19715 of 2015 praying for a writ of mandamus restraining the State authorities from Page 8 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT nominating any member to the Committee of the Bank. No interim orders were passed in the said petition which was filed on 26.11.2015. The reliefs claimed in the aforesaid petition are reproduced below:
"A. The Hon'ble Court be pleased to issue a writ of prohibition or writ in nature of prohibition or any other appropriate writ, order or direction, restraining the respondent State authorities from nominating any Directors/appointing any Directors in the Board of Directors of Mehsana District Central Co-operative Bank Limited.
B. Pending final hearing and disposal of the petition, the Hon'ble Court be pleased to restrain the respondent State Authorities from nominating any Directors/appointing any Directors in the Board of Directors of Mehsana District Central Co- operative Bank Limited.
C. Pending final hearing and disposal of the petition, the Hon'ble Court be pleased to restrain any nominated Director/Director appointed by the State Authorities to vote at the elections of office bearers of Mehsana District Central Co-operative Bank Limited.
D. The Hon'ble Court may be pleased to grant such other and further relief/s as deemed just and proper by this Hon'ble Court in the interest of justice."
11. The Custodian proceeded to issue the election schedule for the Office Bearers fixing 29.12.2015. In the meantime, the petitioners of Special Civil Application Page 9 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Nos.19715 of 2015 moved a Civil Application praying for interim relief. The learned Single Judge by order dated 28.12.2015 passed a detailed order permitting the elections to be held as scheduled, however, if a government nominee is appointed as stated by the learned Additional Advocate General, his vote shall be kept in a separate sealed cover. It further provided that the result of the elections would not be declared till further orders. Learned Single Judge also recorded that although the bye-laws of the society provided for policy/voting by raising finger, but since the vote of the nominee of the Government was to be kept in a sealed cover, with the consent of the counsels for the parties, it was directed that as a special case, the polling/voting shall be by ballot paper. The operative portion as contained in paragraph-10 of the order dated 28.12.2015 is reproduced below :-
"[10] The election process which is scheduled for tomorrow i.e. 29.12.2015 is not stayed. As stated by learned Additional Advocate General Mr. Jani that the Government is likely to appoint a nominee as by now the subscription to the share capital of the society must have been deposited with the bank and therefore, the nominee that would be appointed by the State Government cannot be restrained from casting his vote in the meeting at this stage. Therefore, the process of Page 10 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT election shall take place tomorrow, but the vote caste by the nominee of the State Government shall be kept in a separate sealed cover and the result of the election shall not be declared untill further orders that may be passed in the writ petition. The bye-laws of the society provide for policy/voting raising finger. Since by this order, it is directed that the vote of the nominee of the Government shall kept in sealed cover by consent of the counsel for both the sides, it is directed that the polling/voting shall by ballot paper as a special case limited for the election schedule on 29.12.2015 only as a departure from the provisions of the bye-laws.
This order is passed without prejudice to the contention of both the sides."
12. On 28.12.2015, the State Government extended financial benefit of Rs. 3 Crores as share capital to the Bank and further appointed one Khodabhai Patel as its nominee member to the Committee of the Bank under Section-80(3) of the 1961 Act. As per the schedule declared and in consonance with the interim order dated 28.12.2015, the election of office-bearers of the Committee was held on 29.12.2015 by casting votes through ballot paper. The vote of the State Government nominee was kept separately and sealed and the rest of the votes were kept together and sealed. The result of the election was not declared. Page 11 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT
13. The same set of nine elected members/directors who had preferred Special Civil Application No.19715 of 2015, filed another writ petition in January, 2016, registered as Special Civil Application No.97 of 2016 praying for quashing of the appointment of two professional members appointed by the Custodian as also the appointment of the Government nominee. It was also prayed that the elections of office-bearers held on 29.12.2015 be quashed. The reliefs as claimed in the said petition are reproduced below :
"(A) The Hon'ble Court be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ, order or direction quashing and setting aside the order dated 26.11.2015 annexed at Annexure-N to this petition, passed by the custodian of the Mehsana District Central Co-
operative Bank Ltd., co-opting two professional Directors i.e. the respondent nos. 6 and 7 in the Board of Directors of Mehsana District Central Co- operative Bank Limited.
(B) The Hon'ble Court be pleased to issue a writ of certiorari or writ in the nature of certiorari or any other appropriate writ, direction or order quashing and setting aside the order passed by the State Authorities nominating a Director i.e. respondent no.8 herein, under Section-80 in the Board of Directors of Mehsana District Central Co-operative Bank Limited.
(C) The Hon'ble Court be pleased to issue a writ of certiorari or writ in the nature of certiorari or any Page 12 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT other writ, order or direction quashing and setting aside the elections of Chairman and Vice-Chairman of Mehsana District Central Co-operative Bank Limited held on 29.12.2015 and be pleased to direct that fresh elections of Chairman and Vice-Chairman be held from amongst the 17 Directors i.e. 15 elected directors, 1 representative of the Registrar and 1 representative of the Gujarat State Co-operative Bank, but excluding the 3 nominated and co-opted Directors within a stipulated time.
(D) Pending hearing and final disposal of the petition, the Hon'ble Court may be pleased to stay the execution, operation and implementation of order dated 26.11.2015 annexed at Annexure-N to this petition, passed by the custodian co-opting two professional Directors i.e. the respondent nos. 6 and 7 in the Board of Directors of Mehsana District Central Co-operative Bank Limited.
(E) Pending hearing and final disposal of the petition, the Hon'ble Court may be pleased to stay the execution, operation and implementation of order passed under Section-80 by the State Authorities nominating one Director in the Board of Directors of Mehsana District Central Co-operative Bank Limited. (F) Pending hearing and final disposal of the petition, the Hon'ble Court may be pleased to stay the proceedings of election of Chairman and Vice- Chairman of Mehsana District Central Co-operative Bank Limited, which was held on 29.12.2015. (G) The Hon'ble Court may be pleased to grant such other and further relief/s as deemed just and proper by this Hon'ble Court in the interest of justice."
The petitioners of the said petition were also permitted to amend the petition by adding the prayer clauses Page 13 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT as under:-
"6(AA) The Hon'ble Court be pleased to issue a writ of certiorari or writ in the nature of certiorari quashing and setting aside the resolution of the State Government dated 28.12.2015 to subscribe to the share capital in the Mehsana District Central Co- operative Bank Limited and its consequential resolution dated 28.12.2015 to nominate the respondent No.8 as its nominee be also set aside at Annexure-R Collectively to this petition.
6(DD)Pending hearing and final disposal of the petition, the Hon'ble Court be pleased to stay the resolution dated 28.12.2015 of the State Government at Annexure-R Collectively to this petition, to subscribe to the share capital in Mehsana District Central Co-operative Bank Limited."
Both the petitions were connected.
14. In the meantime, the Custodian passed an order dated 14.06.2018 whereby he removed the two professional members appointed by him on 26.11.2015. This order of the Custodian was challenged by the two professional members by means of Special Civil Application No.10429 of 2018. This third Special Civil Application was also tagged with the earlier two pending Special Civil Applications. Reliefs claimed in this petition are reproduced below:-
"(A) Your Lordships may be pleased to admit and allow this petition;Page 14 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT
(B) Your Lordships may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction, quashing and setting aside the impugned orders dated 14.6.2018 passed by respondent No.3;
(C) Pending admission, hearing and final disposal of this petition, Your Lordships may be pleased to stay the execution, implementation and operation of the orders dated 14.6.2018 passed by respondent No.3 and also be pleased to restrain the Custodian from appointing any other person as a co-opted Professional Director on the managing committee of the respondent no.3-Bank;
(D) Be pleased to grant any other relief which deems fit and proper in the interest of justice."
15. As the term of the Office Bearers i.e. the Chairman and the Vice Chairman is two and a half years, in January 2019, one elected member viz. Navinchandra Jagjivandas Patel filed Special Civil Application No. 224 of 2019 praying for a writ of mandamus for holding fresh elections of the Office Bearers i.e. the Chairman and the Vice Chairman on the ground that two and a half years term is already over. Reliefs claimed in this petition are reproduced below :
"(A) YOUR LORDSHIP may be pleased to issue a writ of mandamus or a writ in the nature of Page 15 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT mandamus or any other writs, order or direction directing the Respondent no.6 (custodian of Bank) to convey the respondent no.3 Collector and or the respondent no.4 Deputy Collector to call and preside over meeting for the election of Chairman and Vice-Chairman of Mehsana District Central Co-
operative Bank Ltd;
(B) YOUR LORDSHIP may be pleased to declare that the period of 2 years and 6 months is over from date of election of Chairman and Vice Chairman of Mehsana District Central Co-operative Bank Ltd;
(C) YOUR LORDSHIP may be pleased to direct respondent no.3, 4 and 6 to hold the election of Chairman and Vice-Chairman of Mehsana District Central Co-operative Bank Ltd;
(D) Pending admission, hearing and final disposal of this writ petition, YOUR LORDSHIP may be pleased to direct the Respondent no.6 (custodian of Bank) to convey the respondent no.3 Collector and the respondent no.4 Deputy Collector, to call and preside over meting for the election of Chairman and Vice-Chairman of Mehsana District Central Co-operative Bank Ltd;
(E) Such other and further relief, as are deemed fit, in the facts and circumstances of this case may kindly be granted."
This petition was also tagged with the earlier pending three petitions.
16. In these four petitions, pleadings were exchanged. The learned Single Judge heard all the four petitions Page 16 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT together and vide common judgment and order dated 13.09.2019 (i) dismissed Special Civil Application No.19715 of 2015 as having been rendered infructuous; (ii) Special Civil Application No.97 of 2016 was partly allowed to the extent that the order passed by the Custodian appointing two professional members on 26.11.2015 was quashed, whereas the appointment of the nominee of the State Government was upheld; (iii) Special Civil Application No.10429 of 2018 challenging the removal of professional members was consequently dismissed and (iv) Special Civil Application No. 224 of 2019 was allowed to the extent that the respondent authorities were directed to hold fresh elections of the Chairman and Vice Chairman at the earliest. The operative portion of the judgment dated 13.09.2019 is reproduced below:-
"35. In the aforestated premises, the Special Civil Application No. 19715 of 2015 is dismissed as having become infructuous. Interim relief granted earlier, if any stands vacated. Special Civil Application No. 97 of 2016 stands partly allowed to the extent that the order dated 26.11.2015 passed by the respondent Custodian of the respondent Bank co-opting two Professional Directors in the Board of Directors of the respondent Bank under Section 74(2) of the said Act is quashed and set- aside. The resolution of the State Government Page 17 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT dated 28.12.2015 to subscribe to the share capital of the respondent Bank and its consequential resolution to nominate the respondent No.8 as its nominee under Section 80(3) of the said Act are upheld. The Special Civil Application No. 10429 of 2018 is dismissed and Special Civil Application No. 224 of 2019 is allowed to the extent that the respondent Authorities shall hold the election of the Chairman and the Vice Chairman of the respondent Bank at the earliest.
All the petitions stand disposed of
accordingly."
17. Aggrieved by the aforesaid judgment and order dated 13.09.2019, six Letters Patent Appeals were filed bearing Letters Patent Appeal Nos. 1661, 1662, 1663, 1664, 1665 and 1698 of 2019. Out of these six appeals four have been withdrawn vide order passed on different dates.
Details of the Letters Patent Appeals and their withdrawals:
17.1 Letters Patent Appeal No. 1661 of 2019 (arising out of Special Civil Application No. 10429 of 2018) and Letters Patent Appeal No. 1698 of 2019 (arising out of Special Civil Application No. 97 of 2016) were filed by Ms. Amitaben V. Shah, one of the professional members but had Page 18 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT withdrawn both the appeals on 3.10.2019 and accordingly, the said two appeals were dismissed vide order of the above date.
17.2 Letters Patent Appeal No. 1662 of 2019 (arising out of Special Civil Application No. 224 of 2019) and Letters Patent Appeal No. 1663 of 2019 (arising out of Special Civil Application No. 97 of 2016) were filed by Dashrathbhai Jethabhai Patel, contesting candidate for the post of Chairman and the said appeals were dismissed as withdrawn vide order dated 1.10.2019.
17.3 Thus, leaving only two appeals pending before us for consideration, namely, Letters Patent Appeal No. 1664 of 2019 (arising out of Special Civil Application No. 224 of 2019) and Letters Patent Appeal No. 1665 of 2019 (arising out of Special Civil Application No. 97 of 2016) filed by Natvarbhai Pitambardas Patel. A chart giving the details is as follows:-
LPA No. SCA No. 1st Appellant's Name Status of Date of appellant in withdrawal writ petition of LPA 1661/19 10429/18 Ms. Amitaben V. Shah Petitioner 03.10.2019 Page 19 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT 1662/19 224/19 Mr. Dashrathbhai J. Patel Respondent No.8 01.10.2019 1663/19 97/16 Mr. Dashrathbhai J. Patel Petitioner No.6 01.10.2019 1664/19 224/19 Mr. Natvarbhai P. Patel Respondent No.7 Pending 1665/19 97/16 Mr. Natvarbhai P. Patel Petitioner No.1 Pending 1698/19 97/16 Ms Amitaben V.Shah Respondent No.6 03.10.2019
18. Before us now there are only two Letters Patent Appeals pending on which arguments have been heard and concluded. Letters Patent Appeal No.1664 of 2019 has been filed by Natvarbhai Pitambardas Patel challenging the directions of holding fresh elections of the Office Bearers issued in Special Civil Application No.224 of 2019 and Letters Patent Appeal No.1665 of 2019 has also been filed by the same appellant Natvarbhai Pitambardas Patel challenging the order of the learned Single Judge passed in Special Civil Application No.97 of 2016 insofar as it dismissed the challenge to the subscribing of Government Share Capital and appointment of the Government nominee by order dated 28.12.2015.
19. We have heard Shri B.B. Naik, learned Senior Counsel assisted by Shri Dipen Desai, learned counsel for the appellants in both the appeals, Shri Kamal Trivedi, Page 20 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT learned Advocate General assisted by Shri D.M. Devnani, learned Assistant Government Pleader for the State respondents in both the appeals, Shri Jal Unwala, learned Senior Counsel assisted by Shri Baiju Joshi, learned counsel for respondent No.1 in Letters Patent Appeal No.1664 of 2019, Shri B.S.Patel, learned Senior Counsel assisted by Shri Chirag B. Patel, learned counsel for the Custodian, Shri Percy Kavina, learned Senior Counsel assisted by Shri C.B.Upadhyaya and Shri Kirtan Mistri, learned counsels for respondent Nos.3 to 5 in Letters Patent Appeal No.1665 of 2019.
20. After the withdrawal of the four Letters Patent Appeals, the questions which remain for consideration by us are (i) whether subscription of share capital by the State vide Resolution dated 28.12.2015 and consequent appointment of nominee vide another Resolution of even date was valid or was not only illegal but also tainted with mala fide, as alleged by the appellants Natvarlal Pitambardas Patel and others in Letters Patent Appeal No. 1665 of 2019? (ii) What would be the term of the Office Page 21 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Bearers of the Committee, i.e. whether it would commence from the date of election of the members of the Committee or from the date of the election of the Office Bearers? The above question arises in the Letters Patent Appeal No. 1664 of 2019 filed by the same appellant Natvarlal Pitambardas Patel. The above are the two legal questions to be determined as insisted by Shri B.B. Naik, leaned Senior Advocate appearing for the appellants in both the appeals.
21. Coming to the two questions raised in these two appeals by Shri B.B. Naik, learned Senior Advocate for the appellants, we deal with each of them one by one.
Subscription of the share capital by the State Government and the consequent appointment of nominee:
22. Chapter-V comprising of sections 51 to 64 of the 1961 Act deals with the State Aid to Societies. Section 51 provides for direct partnership of State Government in societies, the same is reproduced below:Page 22 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT
"51. Direct partnership of State Government in societies.- (1) The State Government may subscribe directly to the share capital of a society with limited liability.
Provided that in the case of societies in the co- operative credit structure, the State Government shall not subscribe for more than twenty-five per cent of the total share capital and the State Government or the society shall have the option to reduce the share capital contributed by the State Government.
(2) The share capital subscribed by the State Government under sub-section (1) may be returned to the State Government by a society in such circumstances as may be prescribed by the State Government."
Chapter-VII comprising of sections 73 to 83 of the 1961 Act deals with management of societies. Section 80 of the Act of 1961 gives power to appoint Government Nominee. Under sub-section(1) of section 80, the State Government where it has subscribed to the share capital of a Society may nominate three representatives on the Committee. Under sub-section(2) of section 80, the State Government may nominate its representatives on the Committee of a Society even without extending subscription to the share capital where the State Government is of the opinion that it would be expedient to do so in public interest. Under sub-section (3) of section 80, it is provided Page 23 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT that the State Government will be entitled to nominate only one nominee in the Committee where the society is a State Cooperative Bank or a Central Cooperative Bank provided the State has subscribed to the share capital of such Cooperative Bank. It also debars the State Government from making any nomination to a bank where State has not subscribed to the share capital of the Bank. The provisions contained in section 80 are reproduced below.
"80. 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 guaranteed the repayment of the principal of and payment of interest on, debentures issued or loans raised by a society, the State Government shall, notwithstanding anything contained in the bye-laws of such society, have the right to nominate three representative on the Committee 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 in the order by which they are appointed, and or for such period as may be specified in the 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 nomination of the Registrar or his nominee on the Committee of a society under the bye-laws of such society shall not be construed Page 24 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT 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 in the operation as a society it is necessary or expedient so to do, it may nominate its representative on the committee of such society as if the State Government had subscribed to the share capital of the society and the provisions 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 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 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."
23. Shri Kamal B. Trivedi, the learned Advocate General, supporting the subscription of the share capital by the State and the consequent appointment of its nominee Shri Khodabhai Patel on 28.12.2015, referred to the relevant dates. According to him, the Custodian passed a Resolution on 04.09.2015 for subscribing share capital by Page 25 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT the State Government on the ground that on 01.09.2015 the CRAR had fallen to 6.74% below the minimum prescribed 7.0% by the Reserve Bank of India.
24 On 07.09.2015, the Bank addressed a letter to the District Registrar in regard to its deteriorating financial position and support from the State Government to the tune of Rs.12 Crore. The District Registrar in turn wrote to the Registrar on 09.09.2015 for taking appropriate steps on the above request. On 15.12.2015, the Bank again wrote a letter to the District Registrar. The Registrar on 18.12.2015 addressed a letter to the State Government. On 28.12.2015, the State Government subscribed an amount of Rs. 3.00 Crore to the share capital of the Bank and on the same date, the State Government nominated Shri Khodabhai Patel as its nominee to the Committee of the Bank. On 24.03.2017, the State Government further subscribed Rs.12 Crore to the share capital of the Bank. According to the learned Advocate General, the request for providing share capital was made much before the date of the election of the members of the Committee and the election of the office- Page 26 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT bearers.
25. In the above backdrop, Shri Trivedi, learned Advocate General submitted that the State Government on the request of the Custodian rightly exercising its discretion under section 80 of the 1961 Act, subscribed the share capital and appointed its nominee and there was no illegality in the same. The subscription was extended to the Bank on the request made by the Custodian as per the guidelines determined by the RBI, and for smooth functioning of the Bank. Consequently, the nominee member appointed was well within the domain of the State and no fault can be found with the same. He thus justified both, the subscription as also the appointment of the nominee under section 80(3) of the 1961 Act.
26. On the other hand, Shri B.B. Naik, learned Senior Advocate appearing for the appellants submitted that the subscription extended by the State as also the appointment of the nominee at the eleventh hour, the day before the election of the Office Bearers was to be held, was mala fide Page 27 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT exercise of power. It is also submitted by Shri Naik that the Custodian being appointee of the State, ought not to have pressurized the State Government to provide the share capital as also the appointment of the nominee in the month of December, 2015, when the elections of the members had already been held in November 2015 and the date for the election of Office Bearers of the Committee was already fixed for 29.12.2015. The Custodian being well aware of the election schedule already declared for the election of Office Bearers and agenda issued on 21.12.2015, ought to have refrained from insisting for extension of share capital and consequent appointment of nominee member. Even the name of the nominee member does not find place in the list of members to whom agenda was circulated nor the Government Resolution mentioned that the nominee would participate but still he did.
27. Special Civil Application Nos. 19715 of 2015 and 97 of 2016 were filed by 9 of the 12 elected members of the Managing Committee, elected on 19.11.2015. The apprehensions expressed by the petitioners in the said Page 28 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT petitions are very specific and categoric relating to the conduct of the Custodian as also anticipated action of the State in order to materially influence the election of the Office Bearers to be held on 29.12.2015. The petitioners therein specifically stated that 09 out of 15 elected members (12 elected on 19.11.2015 and 3 declared elected unopposed from individual constituencies on 27.11.2015) were supporting the candidature of the petitioner Natvarbhai Pitambardas Patel for the post of Chairman and Dashrathbhai Jivabhai Patel for the post of Vice Chairman and only 6 members were supporting the candidature of the two contesting candidates, i.e. Dashrathbhai Jethabhai Patel for the post of Chairman and Gaurangbhai Narayandas Patel for the post of Vice Chairman. It was also specifically stated that the two professional members had been deliberately and mischievously appointed by the Custodian who were supporting Dashrathbhai Jethabhai Patel and Gaurangbhai Narayandas Patel as the Government did not want the petitioners' candidates to win the election of the Office Bearers. But since they were running short of one vote, therefore, it had become Page 29 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT imperative for them to appoint one more member to the Managing Committee by invoking provision under section 80(3) of the 1961 Act, i.e. the Government nominee to support Dashrathbhai Jethabhai Patel and Gaurangbhai Narayandas Patel. It was submitted that the facts as alleged in the said petition could be verified by counting the ballot papers of the election held on 29.12.2015 for the post of Office Bearers.
28. Shri Naik further submitted that the Custodian is appointed only for the limited purpose of carrying out and managing day-to-day affairs of the Bank and his continuance is purely temporary till the date the Office Bearers are elected. Whether or not to request the State for subscribing the share capital would be a policy decision and as such, the Custodian ought not to have insisted for the same but should have waited till constitution of the Committee and the Office Bearers and then it was for the Committee/Managing Committee to have considered and taken a decision as to whether or not to request for financial assistance from the State.
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29. Shri Naik further submitted that the Custodian wrongly and mischievously projected that CRAR of the Bank had fallen below the minimum prescribed by the RBI. According to him, the CRAR of a Bank is to be seen at the time of closing of the financial year i.e. 31st March of every year. Even the RBI declaration of CRAR for each year refer to 31st March. The CRAR of the Bank as on 31.03.2015 was 8.34%. In the previous years also the CRAR on 31.03.2013 was 7.96% and on 31.03.2014 was 8.36%. The Custodian mischievously calculated the CRAR on 01.09.2015 i.e. of the first half when it is extending and giving out loans and making investments that is the time its reserves are depleted. The Bank recovers its loans and investments in the second half and right up to the close of the financial year which is the appropriate time to calculate its CRAR.
30. Shri Naik also submitted that from the chain of events as mentioned by the learned Advocate General, which facts are also set out in the affidavit filed by the State before the learned Single Judge, it is manifestly clear that Page 31 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT the exercise was not bona fide exercise by the State for providing the share capital and appointing its nominee. He therefore submitted that even though the Custodian had all the powers of the Committee but then he should have acted in bona fide and genuine manner, rather than influenced by the extraneous consideration. He thus submitted that subscription of the share capital and the consequent appointment of the nominee by the State under section 83 being bad in law, deserves to be quashed. The learned Single Judge erred in not granting relief to that extent.
31. It was lastly submitted by Shri Naik that the learned Single Judge did not appreciate the facts and circumstances under which the government proceeded to extend the share capital and nominated its nominee as such the impugned judgment suffers from the vice of arbitrariness.
32. Shri Naik also touched one more aspect of the matter in support of his submission regarding mala fide exercise. According to him, it was on 28.12.2015 that the Page 32 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT State Government extended the share capital and on the same day, it proceeded to appoint Shri Khodabhai Patel as its nominee when the meeting for election had already been notified for 29.12.2015, i.e. the next date. Surprisingly, Shri Khodabhai Patel participated in the said election on 29.12.2015 and cast his vote even without being served the agenda. Therefore, it was clear that the Custodian was acting in collusion with the State and both were not acting bona fide in the interest of the Bank.
33. On the other hand, Shri Bharat S. Patel, learned Senior Advocate appearing for the Custodian submitted that the Custodian had all the powers which were vested in the Committee under the 1961 Act and any decision taken by him would amount to a decision of the Committee. He has referred to the relevant provisions of the 1961 Act in support of the above submission. According to him, the request by the Custodian for providing the financial assistance to the Bank by the State Government was in the interest of the institution and there was no malice or extraneous consideration involved.
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34. In rejoinder to the above point, Shri B.B. Naik, learned Senior Advocate submitted that the learned Single Judge on one hand found the action of the Custodian in appointing two professional members on 26.11.2015 to be illegal but at the same time, failed to appreciate that for some reasons and in the similar facts and circumstances, the State Government had illegally appointed its nominee a day before the election at the insistence of the same Custodian.
35. In order to appreciate the respective submissions advanced by the learned counsels, it would be appropriate to refer to the relevant provisions of the Gujarat Co- operative Societies Act, 1961.
36. Section 74D of the 1961 Act provides for appointment of Custodian in certain circumstances. The same is reproduced below:
"74D. Appointment of Custodian in certain circumstances.- (1) Where in respect of any society including a society existing immediately Page 34 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT before the commencement of the Gujarat Co- operative Societies (Amendment) Act, 2015 (Guj.12 of 2015), a new committee of management is, for any reason whatsoever, not elected before the expiry of the term of office of members of a committee of management of such society or having been elected not functioning within a period of three months (not being a committee referred to in section 80A), except for the reason of order of the competent court due to which such election could not be held or the managing committee could not start functioning, the registrar shall by an order in writing, appoint a person or a committee of persons to be the Custodian of the society for a period of one year or until a new committee of management is elected or, as the case may be, starts functioning.
(2) The Custodian shall arrange to hold election of such society within a period of one year and the Committee shall be constituted before the expiration of that period.
(3) The Custodian so appointed shall, subject to the control of the Registrar and to such instructions as he may from time to time give, have powers to exercise all or any of the functions of the committee and take all such actions as may be required in the interest of the society.
(4) All acts done or purported to be done by the Custodian during the period when the affairs of the society are carried on by such Custodian, shall be binding on the new committee of management."
37. Sub-section (1) of section 74D provides for the circumstances under which a Custodian can be appointed. Sub-section (2) provides that a Custodian would arrange for Page 35 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT holding the elections within a period of one year. Sub- section (3) provides the powers of the Custodian, subject to control of the Registrar. Sub-section (4) provides that all actions of the Custodian would be binding on the new Committee of the management.
38. Section 51 of the 1961 Act provides for direct partnership of the State Government in societies. Further section 80 gives the power to the State Government to appoint its nominee where it has subscribed to the share capital of the society and in certain cases in public interest also even where the government has not subscribed in the share capital.
39. Thus, what is to be decided is whether the action of the Custodian in requesting the State Government for financial assistance in the form of share capital was genuine and bona fide and secondly, whether the State Government in extending the share capital on 28.12.2015 and on the very same day appointing its nominee acted bona fide or not.
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40. The Custodian had been appointed in April, 2015, to be exact, 13.04.2015. The first priority of the Custodian was to ensure that the election of the Committee is held at the earliest and the Committee is constituted and to be made functional. The appointment of the Custodian is a stop-gap arrangement under given circumstances. The Custodian is not expected to cling on to the office and continue to exercise the powers of the Committee for as long as possible. Rather it is expected of the Custodian to get the elections organized and hand over the charge to the new elected Committee at the earliest.
41. Initially in 2014, the Collector was approached by the Bank to hold the elections well within the term of the existing Committee, the term of which was to expire on 30.04.2015. However, when elections were not held and it was apprehended that a Custodian would be appointed Special Civil Application No. 2355 of 2015 was filed for appropriate reliefs relating to holding of elections and restraining the respondents from appointing Custodian. Page 37 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Further, as per the statement given by the counsel for the State Authorities during the hearing of Special Civil Application No. 2355 of 2015, as the election was to be held prior to 30.04.2015, the date of expiry of the existing Committee, the petitioner of the above writ petition did not press for restraint order appointing the Custodian. Order dated 24.02.2015 passed in the above petition is reproduced below:
"1.By way of this petition under Article 226 of the Constitution of India the petitioner - bank, through its Chairman/Manager, has prayed for an appropriate writ, order or direction directing the respondents - authorities, more particularly, respondent Nos. 3 and 4 to initiate the process of holding elections of the members of the Managing Committee of the petitioner -
bank and complete the same as early as possible, prior to expiry of the term of the present body.
2. It is the case on behalf of the petitioner that though the term of the members of the Managing Committee of the petitioner-bank is to expire on 01/04/2015 and though the respondent No. 4 is appointed as an Election Officer as back as on 19/12/2014 and though, even as per Section 145(c) of the Gujarat Co-operative Societies Act (for brevity, 'the Act'), as far as possible, the election is required to be held prior to one month of expiry of the term of the Managing Committee, no further steps are taken by the Election Officer. It is further the case on behalf of the petitioner that as such, the election of the Page 38 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT new body is required to be held prior to the expiry of the term of the present committee, otherwise, either the term of the present committee is required to be extended in view of the provisions of the Act or it will give an opportunity/chance to the State Government to appoint an Administrator. It is submitted that, to avoid the aforesaid, the election of the members of the Managing Committee of the petitioner - bank is required to be held as early as possible and prior to the expiry of the term of its members (present body).
3. In response to the Notice issued by this Court, Shri Dhawan Jayswal, learned Assistant Government Pleader, has appeared on behalf of the respondents. It is reported that the respondent No. 4 is personally present in the Court. An affidavit in reply is filed on behalf of the respondent No. 4 submitting that further process of holding the elections of the members of the Managing Committee of the petitioner - bank shall commence on and from 25/02/2015. Shri Jayswal, learned Assistant Government Pleader, for the respondents, more particularly, respondent No. 4, under the instructions from the respondent No. 4 who is personally present in the Court, has stated at the bar that, as such, the process for delimitation of the constituencies as per Rules 3A(8) and (9) of the Gujarat Specified Cooperative Societies Elections to Committees Rules, 1982 (for brevity, 'the Rules') shall be concluded on or before 28th February 2015. He has also stated at the bar that thereafter immediately, the process for preparation and declaration of the Provisional Voters' List shall be initiated and the Election Programme shall also be declared at the earliest after completing the formalities as per the Act and the Rules. He has also stated at the bar that in any case, the election of the members of the Managing Committee of the Page 39 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT petitioner-bank shall be held and concluded as early as possible and preferably on or before 30th April 2015, unless there is any restraint order. The concerned respondents, more particularly, the respondent No. 4 is directed to act as stated herein above.
4. In view of the above, Shri Dipen Desai, learned advocate appearing for the petitioner does not press the present petition and seeks permission to withdraw the same, at this stage. The permission to withdraw the petition is granted accordingly. The petition stands dismissed as withdrawn, at this stage, with aforesaid directions.
4.1 So far as prayer of the petitioner seeking appropriate writ, order or direction for restraining the respondents from appointing Administrator/Custodian in the petitioner bank after expiry of the term of the present body is concerned, no opinion is expressed at this stage and for that, the petition can be said to be premature."
Despite the above undertaking and assurance given, the elections were not held before 30.04.2015 and in the meantime, the Registrar proceeded to appoint the Custodian on 13.04.2015.
42. Special Civil Application No. 6065 of 2015 was filed praying for restraining the State/Registrar from appointing the Custodian. During pendency of the said Page 40 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT petition, the Custodian had been appointed, however, as no interim order was granted, the petitioners therein filed Letters Patent Appeal No. 831 of 2015, which was allowed by a Division Bench of this Court vide order dated 23/24.04.2015 quashing the appointment of the Custodian. Challenging the order of the Division Bench, the State Government preferred Special Leave Petition before the Supreme Court of India, in which an interim order was passed to continue the Custodian. However, there was no stay by the Supreme Court to the holding of fresh elections. Again, when the Custodian was not taking steps to hold the elections, a petition was filed before this Court being Special Civil Application No. 11961 of 2015, which was disposed of by order dated 12.08.2015 directing the Custodian to hold the election within a period of 60 days. Despite the said directions, when the elections were not held, a contempt petition was filed registered as Misc. Civil Application No. 2583 of 2015 in which notices were issued. It was only thereafter that the election process came to be started. Thus, the Custodian was well aware that elections were soon going to be held, efforts for which were being made Page 41 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT right from 2014.
43. CRAR stands for the capital to risk weighted assets ratio, a standard metric to measure balance sheet strength of Banks. It is the measure that prescribes a minimum amount of capital a bank has to hold given the size of its risk weighted assets. This is a variable and is determined and declared by the Reserve Bank of India every year on the close of financial year.
44. We find from the facts narrated in the previous paragraphs regarding the time of determining the CRAR and also from the CRAR of the bank for the relevant year to be more than the minimum prescribed by the RBI. The Custodian ought to have refrained itself by calculating the CRAR in the month of September 2015 and to have requested for investment from the State Government. The submission advanced by the appellants Counsel appears to have substance that it was done for the oblique motives and extra legal considerations.
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45. The above set of facts clearly indicate the collusion between the State, the Registrar and the Custodian not only to tilt the election of the Office Bearers but also to continue to manage the affairs of the Bank. Further, in order to have effective control of the State the Custodian initially appointed two professional members and further requested for financial assistance, although according to the Custodian, it was on the direction of the Registrar, but nevertheless all three being part of the State were bent upon somehow or the other managing and controlling the Bank. The subsequent insistence of the Custodian which was made in December, 2015 reiterating his earlier request for the financial assistance also reflects ingenuine attempt to get the nominee of the State appointed to have better control over the affairs of the Bank and also have an influence in the election otherwise the Custodian ought not to have insisted any further and should have handed over the charge to the elected body and left it to their wisdom whether or not to seek financial assistance from the State.
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46. The net result of the appointment of the State nominee is that till date, the Custodian is continuing for the last more than four and a half years. Thus, we do not find the action of the Custodian in making the request for financial assistance/share capital to the State to be bona fide nor do we find the action of the State in extending the share capital one day before the election of the Office Bearers and appointment of the nominee on the very same day, to be bonafide. Thus, Letters Patent Appeal No. 1665 of 2019 arising out of Special Civil Application No. 97 of 2016 deserves to be allowed to the above extent. Accordingly the decision of the State Government in extending the share capital and the appointment of the nominee vide separate Resolution dated 28.12.2015 is liable to be quashed. EFFECT OF HOLDING THAT APPOINTMENT OF TWO PROFESSIONAL MEMBERS AND ONE STATE GOVERNMENT NOMINEE MEMBER IS ILLEGAL:
47. The appellants in Special Civil Application No. 97 of 2016 had also prayed for quashing and setting aside the election of Office Bearers held in the meeting of 29.12.2015 Page 44 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT along with the prayer for quashing the appointment of two professional members and one State Government nominee member. The learned Single Judge held the appointment of 2 professional members to be illegal, to which there is no challenge before us after the withdrawal of the Letters Patent Appeals by the professional member as also by Dashrathbhai Jethabhai Patel. We have held the appointment of the State Government nominee member also to be illegal. The natural consequence would be to set aside the elections which were held by ballot papers under orders of this Court as the ballot paper only of the State Government nominee member was kept separate whereas the ballot papers of professional members along with other elected members and two nominees of the Registrar and the Cooperative Bank were all kept together and could not be segregated. The learned Single Judge did not set aside the election of 29.12.2015 however directed for fresh election of the Office Bearers as the period of two and a half years term had expired. We have dealt with this aspect at a later stage. COMMENCEMENT OF THE TERM OF 1ST SET OF Page 45 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT OFFICE BEARERS OF THE MANAGING COMMITTEE:
48. The next question which requires consideration is regarding the term of the Office Bearers of the Managing Committee and the finding of the learned Single Judge in holding that the first term of Office Bearers commenced with the election of the members w.e.f. November 2015 and thus had come to an end in May 2018. In short, the submission is that in view of the stay order granted by the learned Single Judge on 28.12.2015 with respect to the election of the Office Bearers scheduled for 29.12.2015, restraining the declaration of the result and which order continued till the judgment of the learned Single Judge dated 13.09.2019, the term of the Office Bearers did not commence and as such the results of the election meeting dated 29.12.2015 be declared and the elected Office Bearers should now be allowed to continue to hold the office for a period of two and a half years. The learned Single Judge erred in holding otherwise.
49. Elaborating the submission, Shri B.B. Naik, Page 46 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT learned Senior Advocate submitted that the words 'two and a half years' used in section 74C(2)(ii) would mean that from the date of declaration of the result of the election of Office Bearers the period of their term would commence. It is also submitted that no person should be made to suffer because of an interim order granted by the Court and therefore also, the elected Office Bearers on account of the interim order dated 28.12.2015 should not be allowed to suffer. A catena of decisions have been placed by Shri Naik, learned Senior Advocate, which we would discuss at a later stage if necessary, in support of the above submissions.
50. On the other hand, learned counsels for the respondents submitted that as there was no dispute with regard to declaration of result of the members of the Managing Committee, which had been done on different dates in the month of November, 2015, the term of the members of the Managing Committee having commenced from that day and the term of the Office Bearers being co-
terminus with the term of the members, the first tenure of two and a half years now being over, the appellants have no Page 47 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT case. The learned counsels for the respondents have also placed reliance on a number of judgments which also we would discuss at a later stage, if necessary.
51. Before proceeding to discuss the respective arguments and the case-law on the point, relevant provisions may be referred to.
52. 'Committee' is defined in section 2(5) of the 1961 Act to mean the Managing Committee or other governing body of a society entrusted with the control of the management of the affairs of the society.
53. 'Officer' is defined in section 2(14) of the 1961 Act as a person elected or appointed by a society to any office of such society according to its bye-laws and includes a list of such officer. Section 2(14) of the 1961 Act is reproduced below:
"2(14) "officer" means a person elected or appointed by a society to any office of such society according to its bye-laws; and includes a chairman, vice-chairman, president, vice-president, managing director, manager, secretary, treasurer, member of Page 48 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT the committee, and any other person elected or appointed under this Act, the rules or the bye-laws, to give directions in regard to the business of such society;"
54. Chapter VII of the 1961 Act deals with management of societies. Section 74 refers to the Committee, its powers and functions. It provides that the management of every society would vest in a committee, constituted in accordance with the provisions of the Act, the rules and bye-laws and such committee would exercise the powers and perform the duties as may be conferred on it by the Act, the rules and bye-laws. Section 74(1C)(i) provides that the term of elected members of the managing committee and its Office Bearers shall be five years from the date of election. The first proviso of the above sub-section provides that the term of Office Bearers shall be two and a half years from the date of election of managing committee for the urban co-operative banks and federal societies. It is not in issue that Mehsana District Central Co-operative Bank Limited is an urban co-operative bank and therefore, the term of the Office Bearers would be two and a half years from the date of election of the managing committee. The Page 49 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT relevant provisions of section 74 referred to above are reproduced herein below.
"74. Committee, its powers and functions.- (1) The management of every society shall vest in a committee, constituted in accordance with this Act, the rules and bye-laws, which shall exercise such powers and perform such duties as may be conferred or imposed on it respectively by this Act, the rules and the bye-laws:
1(A) xxx xxx xxx
1(B) xxx xxx xxx
74(1C) (i) The term of the elected members of the managing committee and its office bearers shall be five years from the date of election.
Provided that the term of office bearers shall be two and a half years from the date of election of managing committee for the urban co-operative banks and federal societies:
Provided further that the managing committee shall fill up a casual vacancy in the committee by nomination out of the same class or categories of members in respect of which the casual vacancy has arisen within sixty days from the date of such vacancy, if the remaining term of office of the managing committee is less than half of its original term:
Provided also that in the case of the urban co- operative banks and the federal societies, the managing committee shall fill up a casual vacancy within sixty days from the date of such vacancy, failing which the State Government shall have the power to fill up such casual vacancy out of the same class or categories of members in respect of which the casual vacancy has arisen, if the Page 50 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT remaining term of office of the managing committee is less than half of its original term.
(ii) The elected members of the managing committee and its office bearers shall cease to hold the office on the date of expiry of their term.
(iii) Notwithstanding anything contained in clause (I), the office bearers of the urban co-operative banks and federal societies who have completed two and a half years on the date of the commencement of the Gujarat Co-operative Societies (Amendment) Act, 2015 (Guj.12 of 2015), shall continue to be such office-bearer for the remainder term.
(iv) The office bearers of the managing committee of the urban co-operative banks and federal societies shall be eligible for re-election.
xxx xxx
xxx"
55. Further, section 74C provides for the conduct of elections of committees and officers of certain societies and term of office of members of committees.
56. Sub-section (1) of section 74C provides that the election of members of the committee and of the officers by the committee, of the societies of the categories mentioned below would be subject to provisions of Chapter XI-A of 1961 Act and would be conducted in the manner laid down by or under Chapter VII. All District Central Co-operative Page 51 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Banks are specified societies under this provision. The Mehsana District Central Cooperative Bank Limited would thus, be a specified society. As such, the provisions of Chapter-XI-A of 1961 Act would also be applicable to the Bank and its elections would be held as per the provisions contained in Chapter VII subject to provisions of Chapter XI-A.
57. Sub-section (2) of section 74C provides in clause
(i) that the term of the elected members of the managing committee shall be five years from the date of election.
Under sub-clause (ii), it is mentioned that the term of Office Bearers of the managing committee shall be two and a half years from the date of election. Sub-clause (iv) provides that the elected members of the managing committee and its Office Bearers shall cease to hold the office on the date on expiry of their term. For ready reference, section 74(C) of 1961 Act is reproduced hereunder:
"74C. Provision for conduct of elections of committees and officers of certain societies and term of office of members of committees.-
(1) The election of members of the committees and of the officers by the committee, of the societies of Page 52 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT the categories mentioned below shall be subject to the provisions of Chapter XI-A and shall be conducted in the manner laid down by or under this Chapter:-
(i) Apex societies mentioned in the Schedule and such other apex societies as the State Government may, by general or special order, published in the Official Gazette, from time to time specify in this behalf, having regard to financial position and shall capital of such societies;
(ii) all District Central Co-operative Banks;
(iii) all Primary Land Development Banks;
(iv)(a) all District Co-operative Sales and Purchase Organization;
(b) all Taluka Co-operative Sale and Purchase Organization;
(v) Deleted
(vi) all Co-operative Spinning Mills;
(vi-a) all district co-operative milk unions; (vi-b) all taluka co-operative processing societies;
(vii) any other society or class of societies, which the State Government may, by general or special order published in the Official Gazette, from time to time specify in this behalf, regard being had to the financial position and share capital of such institutions.
(2) (i) The term of the elected members of the managing committee shall be five years from the date of election.
(ii) The term of office bearers of the managing committee shall be two and a half years from the date of election.
(iii) The managing committee shall fill up a casual vacancy within a period of sixty days from the date of such vacancy, failing which the State Government shall have the power to fill up such casual vacancy out of the same, class of categories of members in respect of which the casual vacancy has arisen if the remaining term of office of the managing committee is less than half of its original term.
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(iv) The elected members of the managing committee and its office bearers shall cease to hold the office on the date of expiry of their term.
(v) Notwithstanding anything contained in clause (ii), the office bearers of managing committee who have completed two and a half years on the date of the commencement of the Gujarat Co- operative Societies (Amendment) Act, 2015, shall continue to be such office-bearers for the remainder term.
(vi) Nothing in clause (i) shall be applicable to the managing committee existing on the date of coming into force of the Gujarat Co-operative Societies (Amendment) Act, 2015.
(vii) The office bearers of the managing committee shall be eligible for re-election.
(3) Notwithstanding anything in the bye-laws of any such society, the committee of management shall be elected by a general body of members of the society and all other committees authorised by or under the bye-laws may be constituted by electing or appointing persons from among the persons who are members of the committee of management, and all such committees shall be sub-committees of the committee of management, and shall be subordinate to it:
Provided that it shall be lawful for the State Government,--
(2) To nominate its representatives on a Committee of any such society under Section 80, or (3) To nominate the first Committee of Management of any such society where the bye-laws of such society so provide.
Provided further that it shall be lawful for any body or authority to nominate its representative on a Committee of such society where the bye-laws of such society so provide.
(4) The election of the Managing Committee shall be conducted before the expiry of its term so as to ensure that the newly elected members of the Managing Committee assumes office immediately Page 54 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT on the expiry of the term of office of the members of the outgoing Managing Committee."
58. Under Chapter XI-A of the 1961 Act, the manner of conduct of election of committees and officers of certain societies is provided. Section 145A provides that all sections of this Chapter XI-A except section 145-Z would apply to elections of the committees of societies belonging to the categories specified in section 74-C. Section 145B(b) defines "election" to mean election of a member or members of the committee of a specified society for the purposes of this Chapter. Thus, the provisions contained in sections 145B to 145Y would relate to election of a member or members of the committee of a specified society. However, under section 145Z, special provision is laid down for election of officers of a specified society, as mentioned in sub-section (1) thereof.
59. Further, sub-section (2) of section 145Z provides that after the election of the members of the committee or whenever such election is due, the election of the officer or officers of any such society would be held as provided in section 74C(2), however, any meeting of the committee for Page 55 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT this purpose shall be presided over by the Collector or an officer nominated by him. It is not in issue that the meeting for the election of Office Bearers of the bank was held on 29.12.2015 presided over by the Collector or his nominee as provided in section 145Z. For ready reference relevant sections 145A, 145B and 145Z of 1961 Act are reproduced hereunder:-
"145A. Application.- All sections of this Chapter except section 145-Z shall apply to elections to committees of societies belonging to the categories specified in section 74-C. 145B. Definitions.- In this Chapter, unless the context otherwise requires,--
(a) "Collector" means the Collector having jurisdiction over area in which the registered office of the society concerned is situated and includes the Additional Collector, and also any officer not below the rank of Deputy Collector appointed by the State Government to exercise the powers and perform the duties of the Collector under this Chapter;
(b) "election" means election of a member or members of the committee of a specified society;
(c) "specified society" means a society belonging to any of the categories specified in Section 74-C".
xxx xxx xxx "145Z. Special provision for election of officers of specified societies.-(1) This section shall apply only to election of officers by members of committees of societies belonging to the categories specified in Section 74-C. Page 56 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT (2) After the election of the members of the committee or whenever such election is due, the election of the officer or officers of any such society shall be held as provided in sub-section (2) of section 74C, and any meeting of the committee for this purpose shall be presided over by the Collector or an officer nominated by him in this behalf."
60. A Constitution Bench of the Supreme Court in the case of N.P.Ponnuswamy Vs. Returning Officer reported in AIR 1952 SC 64 in paragraph-7 thereof, while dealing with the word "election" under the Representation of People Act, 1952 held that the word "election" can be and has been appropriately used with reference to the entire process which consists of several stages and not just the date of polling.
61. Further, Seven Judges Bench of the Supreme Court in the case of Narayan Bhaskar Khare vs. Election Commission of India reported in AIR 1957 SC 694, while dealing with the meaning of the word "election" in Article 71 of the Constitution of India, again observed in paragraph-8 thereof that it would mean when the election is completed, i.e. when the result is declared and the election is concluded.
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62. The term "date of election" has been considered and thrashed out in a number of judgments of the Supreme Court to mean that the date of declaration of result would be the date when the election would be complete. Three judges of the Supreme Court in the case of Ram Pyare Chaudhary and Anr. vs. State of U.P. and others, reported in (1982) 1 SCC 671, while dealing with the question as to the process of election laid down in paragraph-8 thereof that election means process of being elected and the term of office is of the elected member, not of contesting member. When candidates offer themselves for election, they are called candidates and unless elected the term of such candidates would not commence. Their term would commence when elected. Paragraph-8 of the aforesaid report is reproduced below:
"8. At one stage, Mr. Dixit, learned counsel for the respondents stated that there is no stage like declaration of result when the election of the members of the committee of management of a co- operative society is held. Sub-rule (4) of rule 4444 clearly indicates to the contrary and it casts an obligation on the Election Officer to announce the result of election as soon as the counting is complete and he is also under a duty to indicate Page 58 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT the number of votes secured by each candidate. His duty does not end there. He has to display a list of elected candidates on the notice board of the society and also at such public places as he may deem fit. He is also under an obligation to send a copy of the list prepared under sub-rule (6) to the District Assistant Registrar concerned. it is, therefore, not- possible to accept the submission that there is nothing like a stage of announcement of the result of election when election is held for electing members of the committee of management of a co-operative society. In fact, the various stages of election are clearly demarcated in the rules. If the poll has become necessary and is held the unavoidable and inescapable stage of counting of votes and the next stage of announcement of result and subsequently publicising the result are part and parcel and necessary adjuncts of conducting poll. If the rules provide for all the three stages it is difficult to accept the submission that by merely holding of the poll, the process of election can be said to have been completed and the term of members who had contested would commence from the time of holding the election. That is what the High Court holds. Says the High Court:
"that the elections since were held on 11.9.78, mere act of not declaring the result on account of any order issued by the Court or a stay order granted by it which was subsequently vacated could not be taken as if the term of the committee of the management has not commenced".
The High Court, at another stage, observed that the postponement of declaration of the result did not justify the holding of the view that elections had not been held in September 1978. Taken to the logical end, the judgment of the High Court would imply that elected and non-elected members both who participated in the poll would have their term as members commence since the poll is held. Could Page 59 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT this be the intendment of rule 445(1) ? This approach betrays lack of knowledge of the democratic process of election. When the number of the members to be elected to the committee of management is fixed and candidates in excess of the fixed number are desirous of seeking office, the democratic process postulates holding of elections. Mere holding of poll which means recording of votes without anything more would be inconsequential. It is the counting of votes and the consequent declaration of result showing who amongst the contesting candidates has secured highest number of votes or large number of votes which would determine who has become eligible for office by the democratic process. Therefore, recording of votes is a preliminary stage, the counting of votes and declaration of result are integral and inseparable part of process of holding and completing the process of election. No election process can be said to be complete unless the votes are recorded, they are counted and those who have secured highest number of votes are declared elected and the result is publicised, as required by the relevant provision. Rule 445(1) provides that the term of office of the elected members of a committee of management of a co-operative society shall be three co-operative years including the co- operative year of their election. This provision indicates the terminus quo for commencement of the term, viz., that the term of office of the elected members would be three co- operative years including the year of their election. Election means process of being elected and the term of office is of the elected member, not of contesting member. When candidates offer themselves for election, they are called candidates and unless elected the term of such candidates would not commence. Their term would commence when elected. The expression 'year of their election' even on literal and grammatical construction would mean the year in which the member concerned whose term is in Page 60 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT dispute, is declared elected meaning thereby he became eligible for office and entitled to enter office as a member. Apart from literal construction, the completed process of election comprehends nomination, recording of votes, counting of votes and declaration of result and publicising and notifying the result. There ends the process of election. Recording of votes is a mere stage in the process of election. Even when votes are recorded, the candidates contesting the poll do not acquire the status of members of committee of management. That status is acquired on being declared elected. And unless that status is acquired the term of office as member cannot begin to run. Therefore, the expression 'co-operative year of their election year', upon true construction can only mean the year in which the member is declared elected and not the year in which he contested the poll." (emphasis supplied)
63. We may also record here that the view taken by the Supreme Court in the above three cases is the consistent view and there is no deviation from the law laid down in the above cases. Thus, there appears to be substance in the argument of Shri Naik that the term of the Office Bearers who would be declared in the election held on 29.12.2015, has still not commenced as the results have not been declared so far which stands fully fortified by the interpretation of the word 'election' by the Supreme Court. Page 61 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT
64. Learned counsels for the respondents have sought to distinguish the above three judgments of the Supreme Court on the ground that they related to different Statutes and not 1961 Act, which argument has no legs to stand inasmuch as the word "election" would have the same meaning in all the Statutes unless otherwise provided, which is not the case here.
Harmonious construction:-
65. In the present case, there is some inconsistency and conflict in the provision of the 1961 Act with regard to the term of the Office Bearers as would be borne out from the reading of sections 74(1C) and 74C(2) of the 1961 Act. Section 74(1C)(i) provides that the term of the elected members of the managing committee and its Office Bearers shall be five years from the date of election. It does not, in terms, specify whether it is from the date of election of the members of the Managing Committee or from the date of election of the Office Bearers or from the respective date of elections. Further, section 74C(2)(i) provides that the term of the elected members of the managing committee shall be Page 62 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT five years from the date of election and clause (ii) thereof provides that the term of Office Bearers of the managing committee shall be two and a half years from the date of election. Since both the terms have been specifically mentioned in separate clauses, it would refer to the date of election of the members for clause (i) and the date of election of Office Bearers for clause (ii). There can be no other interpretation on a plain reading of these two clauses
(i) and (ii).
66. Further, reading of section 74(1C)(ii) and section 74C(2)(iv) provide that the elected members of the managing committee and its Office Bearers shall cease to hold the office on the date of expiry of their term.
67. From the reading of the above provisions, learned Senior Counsels for the respective parties have sought to interpret these provisions differently for the benefit of their respective parties.
68. Shri B.B. Naik, learned Senior Counsel for the Page 63 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT appellants has submitted that the term of the Office Bearers for a period of two and a half years would commence from the date of election of the Office Bearers and it can have no relevancy or connection to the date of election of the members of the Managing Committee.
69. On the other hand, learned Senior Counsels for the respondents have submitted that reading of these provisions clearly indicates that even the term of the Office Bearers would commence from the date of election of the members of the Managing Committee, otherwise, two terms of the Office Bearers of two and a half years each would extend beyond 5 years which is the maximum period of the term of the members of the Managing Committee. It is their submission that the term of Office Bearers who are also members of the Managing Committee, cannot go beyond the term of the members of the Managing Committee. Therefore, the term of the Office Bearers has to relate back to the term of the members of the Managing Committee commencing from the date of election of the members of the Managing Committee.
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70. Having perused the provisions referred above and also the respective submissions advanced by the learned Senior Counsels for the parties, we do find that there is some ambiguity, vagueness or conflict in the various provisions referred above. Now comes into play as to how such provisions can be reconciled to achieve the objects of the aforesaid provisions. This is where the principle of harmonious construction needs to be applied so as to read the Statute as a whole and not in parts and piecemeal. One thing is clear that the term of the Office Bearers is co- terminus with the term of the members of the Managing Committee. Therefore, the term of the Office Bearers cannot go beyond the period of five years from the date of election of the members of the Managing Committee, which, undisputedly is 19.11.2015 when the result of 12 members was declared after election.
71. Further, we have already held above that the date of election of the Office Bearers has to be the date on which the election process of the Office Bearers is completed and Page 65 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT not merely the date of polling. Further, in the present case, the result of election of the Office Bearers was not declared on account of stay order granted by the High Court on 28.11.2015 as such it cannot be said that their term of two and a half years had commenced. Apparently, what the Legislature intended was that although the elections of the Office Bearers of the Managing Committee is to be held after the election of the members of the Managing Committee but then, as their term would be co-terminus with the members of the Managing Committee, their term would commence from the date of election of the members of the Managing Committee, but only after the declaration of the result, that is, when the election process is said to be completed.
72. The law is well settled by series of judgments of the Supreme Court that the above principle of harmonious construction is to be applied and used for resolving conflict between two provisions in the Act and in various other similar situations where there is conflict between the provisions of two different Acts or a provision in the Act and the Rules, or as the case may be. In the case of Sri Page 66 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Venkatramana Devaruand vs. State of Mysore, reported in AIR 1958 SC 255 the Supreme Court stated as under:-
"The rule of construction is well settled that when there are in an enactment two provisions which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is what is known as the rule of harmonious construction."
73. The above judgment has been consistently followed on the above point by defining what is the rule of harmonious construction. By applying the above principle, the conflicting provisions would both be applied and would also serve the purpose of the said provisions.
74. The learned Single Judge thus erred in holding that the term of the Office Bearers would commence from the date of the election of the members to the committee and therefore, the period of two and a half years having expired, the election for the second term should be held and accordingly, issued directions for holding election for the second term.
75. The argument of the learned counsels for the Page 67 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT respondents, namely, Shri Kamal B. Trivedi, learned Advocate General, Shri Jal Unwala, Shri B.S. Patel and Shri Percy Kavina, learned Senior Counsels is that in order to give a purposeful and harmonious interpretation to the provisions of section 74C(2)(i) and (ii), 74(1C) and section 145Z, the said provisions should be read to mean that the term of the Office Bearers would commence from the date of election of the members, i.e. 19.11.2015 and only then the two terms of two and a half years of the Office Bearers would come to an end simultaneously and at the same time of the members of the Committee otherwise the term of the Office Bearers would go beyond the period of five years of the term of the members.
76. There is no difficulty in accepting such submission of the learned counsels for the respondents but such interpretation can be given only when the election of the Office Bearers is complete and results declared as discussed and held in the earlier part. So long as the result of the Office Bearers is not declared, there would be no gainsaying that their term had commenced from the date of Page 68 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT the election of the members of the Committee. In the present case, result of the meeting of the Committee of 29.12.2015 for election of the Office Bearers has not been declared. Therefore, the submission of the learned counsel for the respondents, though may have substance, but in the facts of the case, cannot be applied and accepted.
77. What the Legislature intended from the above sections is that in a situation where the result of the meeting of the Committee for electing the Office Bearers has been declared and the election process is complete then their term would commence from the date of election of the members of the Committee. So long as the election process is not complete, the term cannot commence. It is a different question that the term may commence from a previous date co-terminus with the term of the members of the Committee but only if the election process is complete and not otherwise. This is the only possible harmonious construction of all the above referred sections of the 1961 Act.
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78. The learned Single Judge having declared that the Custodian had wrongly and illegally appointed professional members, who had cast their votes in the meeting of 29.12.2015, would have a direct bearing on the result of the said elections of Office Bearers. The next question would be whether direction could be given for declaring the result of the meeting of 29.12.2015 held for election of the Office Bearers. Result could be declared by excluding two votes which could be only in case there was a margin of three or more votes excluding the vote of a State Govt. nominee, or in the alternative, the meeting had to be scraped. The learned Single Judge erred in holding that the term of the first set of the Office Bearers whose polling was held on 29.12.2015, came to an end upon completion of two and a half years which would be in the teeth of the law laid down by the Supreme Court.
79. For the above reasons, Letters Patent Appeal No. 1665 of 2019 deserves to be allowed along with Special Civil Application No. 97 of 2016 and also Letters Patent Appeal No. 1664 of 2019 deserves to be allowed and consequently, Page 70 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Special Civil Application No. 224 of 2019 deserves to be dismissed.
WHAT SHOULD BE DONE WITH MEETING OF 29.12.2015 HELD FOR ELECTING THE OFFICE BEARERS:
80. The meeting of the Committee for election of the Office Bearers was held on 29.12.2015, the results of which were not declared on account of an interim order passed by the learned Single Judge on 28.12.2015. Before us, there is no challenge by any of the candidates contesting for the post of Vice Chairman. The only challenge is by Natvarlal Pitambardas Patel, one of the candidates for the post of Chairman. We may also note here that in Special Civil Application No. 97 of 2016 there is specific prayer to set aside the election of Office Bearers held on 29.12.2015. This Special Civil Application was filed by the appellant of both the appeals before us.
81. The two professional members had also cast their votes through ballot paper in the said election held on Page 71 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT 29.12.2015. Their ballot papers were kept in the same box in which the ballot papers of other elected members and nominees of the Registrar and the Bank had been kept. Only the ballot paper of the member appointed by the State Government under section 80(3) of the 1961 Act, was kept separately.
82. These two professional members were removed by the Custodian by order dated 14.06.2018. This was put to challenge by way of Special Civil Application No. 10429 of 2018 filed before the learned Single Judge. The said petition was dismissed by the learned Single Judge. The two Letters Patent Appeals bearing Letters Patent Appeal Nos. 1661 of 2019 and 1698 of 2019 filed by the professional members stood dismissed as withdrawn by separate orders passed on their appeals. As of date before us, there is no challenge to the removal of the two professional members and the learned Single Judge having held their appointment by the Custodian as illegal, the vote cast by them cannot be counted now. It would be difficult to segregate their votes and then count the remaining votes to find out the actual Page 72 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT result of the elections held on 29.12.2015 to elect the Office Bearers. However, as we have no mechanism to correctly ascertain as to whom the two professional members had voted, we cannot discount their votes from either of the contesting candidates. Even otherwise, as the two professional members and one State nominee have been held to be illegally and invalidly appointed, the election of 29.12.2015 held by ballot paper with no identification of the members casting their ballot, the said election cannot be given effect to.
83. The relevancy of the question regarding the term of the Office Bearers would be relevant only after the result of the election held on 29.12.2015 could be validly declared. It is only if there was a margin of three or more votes that the result could be declared by excluding two votes of the professional members, even though not known but would not materially affect the result.
84. It was for the above said purpose that we had called for the original records of the meeting dated Page 73 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT 29.12.2015 by order dated 11.11.2019. The same were produced on 14.11.2019 and we had examined the same. None of the parties had raised any objection either to the summoning of the original records of the meeting or its perusal by the Court.
85. For the post of Chairman, the two names proposed and seconded were of Natvarlal Pitambardas Patel and Dashrathbhai Jethabhai Patel whereas for the post of Vice Chairman, the names proposed and seconded were of Dashrathbhai Jivabhai Patel and Gaurangbhai Narayandas Patel. The ballot papers were accordingly printed containing the names of the two candidates for each post.
86. There were two separate sealed envelopes. One envelope contained 19 ballot papers (15 elected, 01 nominee of Registrar, 01 nominee of Bank, 02 professional members). The other envelope contained 01 ballot paper of the Government nominee. Upon counting in the bigger envelope, we found that there were 9 votes in favour of Natvarlal Pitambardas Patel and 10 votes in favour of Dashrathbhai Page 74 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Jethabhai Patel for the post of Chairman. The State nominee had voted in favour of Dashrathbhai Jethabhai Patel for the post of Chairman. His vote had been separately kept in the smaller envelope. It is not known as to in whose favour the two professional members had voted.
87. Similarly, while counting the ballot papers in the bigger envelope for the post of Vice Chairman, one ballot paper was found to be invalid, where the stamp had been placed in front of the names of both the candidates, i.e. there was double stamping. From the valid ballot papers, there were 09 votes in favour of Gaurang Narayandas Patel and 09 votes in favour of Dashrathbhai Jivabhai Patel i.e. in equal number. The Government nominee Khodabhai Narsangbhai Patel had voted in favour of Gaurang Narayandas Patel. Again, the difference was less than 3.
88. Thus, the result of the election held on 29.12.2015 for the post of Chairman and Vice Chairman cannot be declared as it cannot be ascertained as to in whose favour the 2 votes of professional members had gone. Page 75 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT
89. We may further record here that after the decision of the learned Single Judge, the Custodian had notified the elections of the Office Bearers for 30.09.2019. The appellants had requested for stay of the said election by way of Civil Application. On the said application vide order dated 27.09.2019 it was provided that the elections may be held on 30.09.2019, however, its results would not be declared. The Election Officer had filed a report by way of affidavit dated 30.09.2019 according to which only name of Vinodbhai Ranchhodbhai Patel was proposed and seconded for the post of Chairman and further only the name of Dashrathbhai Jivabhai Patel was proposed and seconded for the post of Vice Chairman. In all 18 members were present at the time of election. We have also noted from the affidavit of the Election Officer that for the post of Chairman, the nomination of Vinodbhai Ranchhodbhai Patel was proposed by Navinchandra Jagjivandas Patel and seconded by Azabhai Dhanabhai Katariya. Further, for the post of Vice Chairman, the nomination of Shri Dashrathbhai Jivanbhai Patel had been proposed by Ishwarbhai Jivabhai Patel and Page 76 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT seconded by Gaurangbhai Narayanbhai Patel. It is interesting to note that the candidate who had contested for the post of Vice Chairman in the election held on 29.12.2015 against Dashrathbhai Jivanbhai Patel was now seconding his name.
90. The Government nominee Khodabhai Narsangbhai Patel had participated in the earlier election of 29.12.2015 and also the second election of 30.09.2019. By this judgment we have held his appointment vide Government Resolution dated 28.12.2015 as illegal. Since there is no contest in the second election of 30.09.2019 his removal will not have any effect on its result. In so far as the first election is concerned there also, it will not have any impact for the reasons already recorded above.
91. In view of the above, we now deem it appropriate to direct that the results of the election of the Office Bearers held on 30.09.2019 be declared, the two elected office bearers to the post of Vice Chairman may be immediately allowed to take over charge and the Custodian will forthwith Page 77 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT handover the charge. The Election Officer may formally pass orders to the aforesaid effect forthwith.
92. Learned Counsels for the parties have placed reliance upon a large number of judgments in support of their submissions. We have dealt with the relevant ones and the others, which according to us have no direct bearing on relevance or even if relevant are in support of our reasons given which are based on clear interpretation of law and the facts of this case, as such we are not inclined to further loath this judgment by referring to them.
93. In view of the discussion made above, the following conclusions are arrived at by us:-
(i) The subscription of the share capital by the State Government vide Resolution dated 28.12.2015 and the consequent Resolution of even date appointing the Government nominee under section 80(3) of the 1961 Act is illegal and liable to be quashed.
(ii) The term of the Office Bearers of the Managing Committee for which the election was held in the Page 78 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT meeting of the members of the Managing Committee on 29.12.2015 has not commenced till date.
(iii) The result of the election of the Office Bearers of the Managing Committee held on 29.12.2015 cannot be given effect to and the said election is to be treated as scrapped.
(iv) The election held on 30.09.2019 for the post of Office Bearers of the Managing Committee being uncontested, its results be declared forthwith and be given effect to.
94. Accordingly, both the present appeals are allowed with the following directions:-
(1) Letters Patent Appeal No. 1664 of 2019 is allowed and consequently, Special Civil Application No.224 of 2019, in view of the reasons recorded above, stands disposed of.
(2) Letters Patent Appeal No. 1665 of 2019 is also allowed and consequently, Special Civil Application No. 97 of 2016 praying for quashing the Government Page 79 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020 C/LPA/1664/2019 CAV JUDGMENT Resolution dated 28.12.2015 for providing share capital and the appointment of Government nominee under section 80(3) of the 1961 Act, is allowed and both the resolutions are quashed.
(3) Impugned judgment of the learned Single Judge stands modified to the aforesaid effect. (4) The Election Officer for the meeting held on 30.09.2019 to forthwith declare the results of the meeting dated 30.09.2019 and the said result be communicated to the Custodian forthwith. (4) The Custodian- respondent in both the appeals to forthwith handover charge to the elected Office Bearers of the Managing Committee.
95. There shall be no order as to costs.
96. In view of the disposal of both the Letters Patent Appeals, the connected Civil Applications stand disposed of.
97. Direct service permitted.
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98. The original records of the election meeting held on 29.12.2015 be returned to Shri D.M.Devnani, learned Assistant Government Pleader for transmitting them to the concerned authority from where they were summoned.
Sd/-
(VIKRAM NATH, CJ) Sd/-
(A.J. SHASTRI, J) A.M. PIRZADA/P.SUBRAHMANYAM Page 81 of 81 Downloaded on : Fri Jan 24 02:34:58 IST 2020