Bombay High Court
Madanlal Tantia Of Bombay And Others vs Collector Of Bombay And Ors. on 11 June, 1992
Equivalent citations: (1993)ILLJ502BOM
Author: S.H. Kapadia
Bench: S.H. Kapadia
JUDGMENT
1. The question involved in this petition under Article 226 of the Constitution of India is whether the provisions of Section 49(3) of the Maharashtra Co-op. Societies Act, 1960 under which the employer deducts certain agreed and stipulate amounts to be paid to the workers' society from their wages is applicable and if so whether the Directors of a company which has entered into an agreement contemplated by Section 49 of the said Act are personally liable under Section 49(3) of the said Act read with Section 267 of the Maharashtra Land Revenue Code, 1966.
2. The facts giving rise briefly to this petition are as follows :
(a) Petitioner Nos. 1, 2 and 3 were the Directors of respondent No. 5 "Shree Sitaram Mills Ltd.", which was subsequently taken over under the Textile Undertakings (Taking Over of Management) Act, 1983 and handed over to the National Textile Corporation i.e. respondent No. 6 herein. The said take-over took place pursuant to the Ordinance which was substituted by the said Act of Parliament in the year 1983. Petitioner No. 3 resigned as Director of 5th respondent in October 1981.
(b) On February 5, 1979, the Deputy Registrar Co-op. Societies, Bombay issued an order under Section 49(3) of the Maharashtra Co-op. Societies Act, 1960 for recovery of an amount of Rs. 9,13,129.95 with interest at the rate of 15 per cent per annum to be recovered from the management of respondent No. 5 company. The said order recites that respondent No. 5 company had recovered the dues from the members of Shri Sitaram Mills Kamagaranchi Sahakari Maryadit, Bombay (a co-operative society of workers) to the extent of Rs. 9,13,129.95 under the provisions of Section 49 of the Maharashtra Co-op. Societies Act, 1960. The said order further states that a notice was issued to the management of the company respondent No. 5 on December 28, 1978 for payment of the said dues to the said society and since the management had failed to clear the society's due amounting to Rs. 9,13,129.95, the said order was passed for recovery of the aforestated amount of Rs. 9,13,129.95 with interest mentioned herein.
(c) Pursuant to the said order dated February 5, 1979, Notices of demand of payment of land revenue under Section 267 of the Maharashtra Land Revenue Code, 1966 came to be issued against the Directors of respondent No. 5 company. The said notices of demand were issued to the petitioner Nos. 1 to 5 herein. As stated hereinabove, the said notices were issued to petitioner Nos. 1, 2 and 3 who are Directors of the company; whereas petitioner No. 4 claims to be Finance Manager and petitioner No. 5 was General Manager-cum-Secretary.
(d) The notice of demand dated March 24, 1980 (being Exhibit J) notice of demand undated being Exhibit K-1 and notice on demand dated October 29, 1986 being Exhibit K-2 to the petition as also notice of demand dated October 29, 1986 Exhibit K-3 are the impugned notices of demand which are sought to be challenged by the petitioners in the present case. Mr. Dhanuka, the learned counsel appearing on behalf of the petitioners clarified that similar notices have been issued pursuant to the order of the Deputy Registrar dated February 5, 1979 and all the other notices have not been annexed to the present petition. Briefly, the petitioners are seeking to challenge the recovery proceedings instituted under the Maharashtra Land Revenue Code pursuant to the order passed by the Deputy Registrar dated February 5, 1979.
To complete the narration of the facts, by an agreement dated April 13, 1980 entered into between respondent No. 5 company on the one hand and the said workers' society being respondent No. 2 on the other hand, the respondent No. 5 company agreed to act as an employer under Section 49(1) read with Section 49(3) of the Societies Act of 1960. The recital to the said agreement states that respondent No. 5 company as an employer as per the provisions of Section 49 of the Societies Act of 1960 and the prior enactments in relation to the said respondent No. 2 society was deducting the amounts from the wages of the workmen every month to be paid to the society-respondent No. 2. The said agreement further recites that the huge amounts were deducted and could not be remitted to the said society of respondent No. 2 by respondent No. 5 company. The said agreement further concedes that the company had committed defaults in not remitting the amounts to the Society of Workers although huge amounts were deducted from time to time from their salary. Under the agreement the 5th respondent as an employer agreed to pay the accumulated amount with interest mentioned in the said judgment. The agreement further recites that the workmen had taken appropriate steps to recover the arrears of wages as arrears of land revenue and the proceedings were initiated under Section 49 of the Maharashtra Co-op. Societies Act, 1960 which proceedings have been referred to earlier in the judgment. By the said agreement it has been further stated that the recovery proceedings under Section 49 of the Societies Act of 1960 have been initiated. By the said agreement the employer respondent no. 5 company agreed to pay to the society instalment of Rs. 60,000/ per month payable on or before 14th of each month, till all the dues either by way of unremitted balance or by way of interest charged by the society was paid. Clauses 2, 3, 8 and 9 of the said agreement are very material for the purpose of deciding this petition and accordingly they are quoted hereinbelow :
".........
2. The Employer further agrees to pay to the Credit Society a sum of Rs. 60,000/- every month payable on or before 14th of each month till all the dues either by way of unremitted balance or by way of interest charged by the Society in their accounts till the entire amount due by way of arrears stands cleared up.
3. In case the said instalments are paid regularly and arrears are wiped out, the Employer requests the Credit Society relaxation in the rate of interest by 1.1/4% in the amount of Rs. 2,36,661.00 shown in the balance sheet of the Society for the year ending June, 1978 being the interest due at the rate of 15%. This concession is being given by the Management Committee to the Credit Society by this agreement subject to the approval of the General Body of the employer.
5. to 7 ....
8. In view of this agreement, the Credit Society agrees to withdraw its application pending with the Collector, Bombay.
9. Apart from this, the Credit Society further agrees to withdraw its application for sanction to file criminal complaint under the provisions of the Co-operative Societies Act, 1960. However, in case the employer commits default in complying with terms and conditions of this agreement, the Society is at liberty to file a fresh application requesting the State of Maharashtra for sanction to prosecute under the provisions of Section 146(c) to 149(b) etc. of the Maharashtra Co-op. Societies Act, 1960."
The above narration of the agreement therefore indicates that the employer had entered into an agreement under Section 49 of the Societies Act of 1960 voluntarily; that as an employer it was agreed that they will deduct certain amounts every month from the wages of individual employee and pay the amount to respondent. No. 2 society which was a credit society of the workmen. Under the said agreement it was further conceded that the company respondent No. 5 had collected huge amounts from the salary of the employees (3000 approximately) and after collecting the amount the same has not been remitted to the workers' society. In the circumstances, the recovery proceedings were taken pursuant to the order of the Deputy Registrar, Co-operative Societies, dated February 5, 1979. Under the said agreement it was agreed that the society will be paid every month Rs. 60,000/- on or before 14th day of each month. This agreement appears to have been entered into respondent No. 5 company and the 2nd respondent society because the credit society of the workmen was keen to receive the amounts which constituted hard earned wages of all the employees. By the said agreement, application for sanction to file a criminal complain was withdrawn. However, liberty was granted to file a fresh application for sanction to prosecute under Sections 146(c) and 149(b) of the Societies Act of 1960.
(e) It is the case of the petitioner that by February 20, 1981 the entire amount which was claimed under the orders of the Deputy Registrar, Co-operative Societies, dated February 5, 1979 and which amount had become an amount of Rs. 10,87,782.69 was paid by the company except the balance amount of Rs. 68,000/- (approximately) which according to the company was paid by the company on or about February 20, 1981. According to the petitioners, the amount which is sought to be recovered under the impugned recovery proceedings was only towards the interest and the amount sought to be recovered of Rs. 10,87,782.69 (approximately) was exaggerated amount. According to the learned counsel for the petitioners, although no specific amount has been mentioned in the petition, the company, according to Mr. Dhanuka, in any event was not liable to pay the said amount of Rs. 10,87,782.69 but only an amount of 5,20,566.65 (approximately) as on October 29, 1986 which as of date, according to the learned counsel, would be about Rs. 9 lacs. This statement was made in view of the question posed to Mr. Dhanuka as to what, according to the petitioner, was the liability as of date. At this stage, it may be mentioned that the petitioners have refused to pay even the amount which, according to them, is payable i.e. approximately Rs. 9 lacs. At this state it may be noted that the petitioners herein in the petition have not disclosed the names of the Directors or the managers who were responsible to deduct and remit the amounts to the society under Section 49 of the said Act. This Court cannot lose sight of the fact that under Article 226 of the Constitution of India, this Court has to consider the equities apart from the questions of law.
(g) To complete the narration of facts, as mentioned hereinabove, on October 18, 1983 the 5th respondent company was taken over under the provisions of the Textile Undertakings (Taking Over of Management) Act, 1963 by the 6th respondent and in the circumstances the agreement dated April 13, 1980 remained unfulfilled as alleged.
2-A. At the outset, it may be stated that petitioner Nos. 1, 2 and 3 have filed this petition on the ground that they were Directors of respondent No. 5 company at the relevant time. The petition proceeds on the basis that they were in ultimate control of the establishment. There is no averment to the contrary. There is no averments in the petition that they were not the nominated Directors. There is no averment in the petition to the effect that the nominated Directors were some other persons and not the petitioner Nos. 1, 2 and 3. In the absence of any allegation to the contrary, this Court has to proceed on the basis that the petitioners were in ultimate control of the affairs of the establishment.
3. Mr. Dhanuka, the learned counsel appearing on behalf of the petitioners, submitted as follows :
(a) Section 49 of the Co-operative Societies Act, 1960 enjoins liability on the employer to deduct certain amounts every month from the wages and pay the same to the society of the workmen pursuant to the agreement under Section 49 of the said Act. According to the learned counsel for the petitioners, respondent No. 5 company was the employer under Section 49 of the Maharashtra Co-operative Societies Act, 1960 and not the petitioner Nos. 1, 2 and 3. Since petitioner Nos. 1, 2 and 3 were Directors of the company-respondent No. 5 and since petitioner Nos. 4 and 5 were the employees of the company, the said petitioners were not liable to pay the amounts despite the fact that the company had committed defaults in not paying the amount as per the above agreement. Mr. Dhanuka further submitted that the relationship between respondent No. 2 society and 5th respondent-company was that of employee and employer and there was no privity between the petitioner on the one hand and the 2nd respondent on the other hand.
(b) Mr. Dhanuka for the petitioners further submitted that in any event respondent No. 2 society by virtue of the agreement dated April 13, 1980 had accepted the 5th respondent as its employer and therefore the rights and contentions of the parties are squarely governed by that agreement. He further submitted that since the 5th respondent company was accepted as an employer and since respondent Nos. 2 and 5 have pursuant to the said agreement the second respondent society is estopped from raising a contention that the petitioner Nos. 1, 2 and 3 are their employers and not respondent No. 5 company. In the circumstances, Mr. Dhanuka submitted that since the petitioner Nos. 1, 2 and 3 were not the employers under Section 49 of the Maharashtra Co-operative Societies Act, 1960 no recovery proceedings would lie against the petitioners.
(c) Mr. Dhanuka further submitted that under Section 49 of the Societies Act of 1960, the Deputy Registrar, Co-op. Societies, had issued certificate by which an amount of Rs. 10,87,782.69 was certified to be recoverable and since the said order of the Deputy Registrar was passed without giving any hearing to the petitioners and without adjudicating upon the right of the parties, the order of the Deputy Registrar dated February 5, 1979 and the certificates issued from time to time are liable to be set aside. Mr. Dhanuka further submitted that the Deputy Registrar did not decide the rights of the present petitioners and the dispute was between the second respondent society on the one hand and the 5th respondent company on the other hand, and in the absence of any such adjudication by the Deputy Registrar regarding rights of the petitioners, the principles of natural justice have also been violated qua the rights of the petitioners.
(d) Mr Dhanuka thereafter submitted that there is no provision in the Maharashtra Co-operative Societies Act, by which the Directors of the company being the petitioner Nos.1, 2 and 3 would be held liable as the employers under Section 49(3) of the said Act. In this connection he drew my attention to the provisions of Section 146(b) and Section 147(b) of the Act to show that the Legislature had taken into account the requisite contingency under the relevant provisions of the Act where the copy is a defaulter and since the complete code to that extent is provided under Section 146(b) and Section 147(b) of the Act, it is clear that Section 149 cannot be invoked against individual Director of the company.
(e) Mr. Dhanuka thereafter submitted that Section 49 of the said Act is penal in nature and therefore a strict interpretation applies and since 5th respondent company has been agreed upon to be an employer by the above agreement with 2nd respondent, the petitioners are not liable personally as they were merely Directors and the employees of the company. He further submitted that the petitioner Nos. 4 and 5 in any event are the employees of the company as Finance Manager and General Manager-cum-Secretary of the 5th respondent, and therefore the petitioners 4 and 5 who were not Directors at any time are not personally liable.
(f) Mr. Dhanuka lastly submitted that in any event since the entire assets of the company have been taken over by the Act of 1983, the petitioners are not in a position even to pay the amount of Rs. 5,20,566.65 which became due in 1986 and which liability to-day is approximately Rs. 9 lacs. He further submitted that since the assets of the 5th respondent company have been taken over, lenient view ought to be taken particularly in view of the fact that the petitioners are not the employers and they are not a company which is in the present case respondent No. 5.
4. Briefly, the above submissions of Mr. Dhanuka, therefore, can be summed up to say that, since there is no express provision by which the Directors of the company could be made personally liable, Section 49 of the Maharashtra Societies Act, 1960 is not attracted.
5. Before dealing with the submissions made by Mr. Dhanuka and the various authorities cited by him, it would be relevant to refer to certain provisions of the Maharashtra Co-op. Societies Act, 1960. Section 2 of the said Act is a definition section. The said definition section does not define the word 'employer'. Chapter IV of the said Act deals with Incorporation, Duties and Privileges of Societies. Section 49 of the said Act is the main section which requires consideration in this judgment. Section 49 deals with deduction from salary to meet society's claim in certain cases. Section 49(1) inter alia lays down that a member of a society may execute an agreement in favour of the society, providing that his employer shall deduct from the salary or wages payable to him by the employer, such total amount payable to the society and in such instalments as may be specified in the agreement and to pay to the society the amounts so deducted in satisfaction of any debt or other demand of the society against the member. Section 49(2) lays down that on receipt of a copy of the agreement, the employer shall, if so required by the society by a requisition in writing, make deduction in accordance with the agreement and pay the amount so deducted to the society, as if it were the part of the wages payable under the Payment of Wages Act, 1936 on the day on which he makes payment. Section 49(3) of the Act lays down that if after receipt of a requisition made under Section 49(2) of the Act, the employer fails to deduct the amount or makes default in remitting the amount deducted to the society, the employer shall be personally liable for the payment or where the employer has made deductions but the amount so deducted is not remitted to the society, then such amount together with interest thereon would be recoverable as arrears of land revenue and the amount and interest so due shall rank in priority in respect of such liability of the employer as wages in arrears. A bare reading of the section indicates firstly that Section 49 of the Act inter alia lays down that the workmen are entitled to form their own society and in order to ensure payments to the society of amounts which are payable by the workmen to the society, Section 49 of the Maharashtra Co-op. Societies Act provides for deduction of certain amounts by the employer every month from the wages of individual workman to be paid to the society. Section 49 of the said Act is an enabling provision. The employer is certainly entitled to refuse to enter into such an agreement and he is not statutorily bound to enter into such agreement, Section 49 proceeds on the basis that the agreement is entered into by the employer with the workman and the said employer deducts the amount from the wages to be paid to the society, the employer assumes fiduciary capacity. If this object of section is kept in mind, it is clear as to why Section 49(3) is made penal in nature by the Legislature, particularly in view of the fact that the employer who acts as a trustee on behalf of the employees is bound to remit the amounts from time to time which he has deducted from the salary of the workmen. If this interpretation is kept in mind the submission made by the learned counsel that the assets of the company have been taken over by the Act of 1983 will also lose its merit. The employer under Section 49(3) who deducts certain amounts from the wages cannot contend that in view of the takeover he should be exonerated from the consequences of not remitting moneys which belonged to the workmen. If the above principle is also kept in mind it is clear that Sec. 43 of the Act which refers to the expression 'employer' must be read in the widest possible term. The Legislature has not used the word company in Section 49(1).
The Legislature has used the word 'employer' who deducts certain amounts from the wages of the employees to be paid over to the workers' society and it is for this very reason that in Section 49(2) there is a reference to the Payment of Wages Act, 1936 which clearly indicates that the amount deducted by the employer constitutes the wages under the Payment of Wages Act. Similarly, under Section 49(3) of the said Act the amount is recoverable as arrears of land revenue from the employer who may be a company, partnership, individual or association of persons. But once the amount is recoverable as wages the provisions of the Maharashtra Land Revenue Code and Section 267 of the Code would also apply. In the present case, therefore the word 'employer' in the context of wages payable to the workmen should be read in the widest possible term. Mr Dhanuka for the petitioners submitted that it is no doubt true that the company is the employer under the Act but the concept of employer under Section 49 cannot be extended to include the Directors of the company inasmuch as there is no such express provision making the Directors of the company personally liable. In support of his submission Mr. Dhanuka placed heavy reliance on the judgment of the Division Bench of this Court in the case of Suresh Tulsidas Kilachand v. Collector of Bombay & Ors. reported in 1984 M.L.J. Mr. Dhanuka relied upon various paragraphs of the said judgment in support of his contention that unless there is express provision making the Directors of the company personally liable the recovery proceedings cannot be instituted against the petitioners. At the outset it may be stated that this Court in the above judgment of Suresh T. Kilachand's case (supra) was not required to consider the provisions of Section 49 of the Societies Act of 1960.
This Court in the above judgment has considered the various provisions of the Employees' State Insurance Act, 1948. One of the main arguments advanced in the said case by the petitioners was that unlike Section 159 of the Income-Tax Act which makes the Directors personally liable in the case of private limited company, there was no such clear cut provision under the Employees' State Insurance Act to make the Directors of public Limited Company personally liable and therefore no proceedings could be instituted to recover Employees' State Insurance contribution personally from the Directors of the Public Limited Company, inasmuch as the company is a separate legal entity. It is true that in the said case, the contention of the petitioners was accepted particularly in view of the fact that under Employees' State Insurance Act there was no such provision making the Directors personally liable. At this stage, it may also be mentioned that certain provisions of the Factories Act 1946 dealing with the definition of the word 'occupier' in the context of controversy which arose in Suresh T. Kilachand's case (supra) was also considered. It may be stated that under the Factories Act the definition of the word 'occupier' at the relevant time applied to certain Nominated Directors or Managers who could be made liable for defaults like non-payment of wages as they are in ultimate control of the establishment. So also under Section 3 of the Payment of Wages Act the nominated Directors/Managers could be held responsible for such defaults. This discussion is required to be mentioned because Mr. Dhanuka has also invited my attention to certain judgments of this Court where this Court under the Employees' State Insurance Act or Factories Act found that certain nominated Directors could alone be prosecuted or made personally liable and not all other Directors. In the present case, without going into the various sections of the Employees' State Insurance Act, it may be stated briefly that the provisions of Section 49 of the Co-op. Societies Act was not under consideration in Suresh T. Kilachand's case. The provisions of Section 49 of the Co-op. Societies Act was in any event similar to Section 179 of the Income Tax Act and therefore the petitioners are personally liable. As stated hereinabove the 5th respondent company entered into agreement and they agreed to deduct certain amounts from the wages of the workmen and having so deducted they have failed to remit the amounts to the society and the result is that the hard earned moneys or wages of the poor employees have been frittered away by the persons who represented themselves to be the employers under Section 49 of the Maharashtra Co-op. Societies Act. Section 49 which deals with the the word 'employer' and Section 49(3) which makes the person liable personally as regards recovery is very similar to Section 179 of the Income-Tax Act and in the circumstances in view of the express provisions made by the Legislature it is not open to the petitioners to contend that the recovery proceedings cannot be instituted personally against the Directors of the company.
6. In this connection, Mr. Dharmadhikari, the learned counsel appearing on behalf of the society also drew my attention to the Statement of Objects and Reasons in the Maharashtra Government Gazette, 1985 (Part V) at page 481 and also to the Amendment Act No. 27 of 1985 and Amending Act 20 of 1986 by which certain amendments were carried out to Section 49 of the Societies Act. These amendments indicate the intention of the Legislature to treat the employer personally liable in the matter of recovery of wages as arrears of land revenue. The Legislature has used the word 'employer'.
7. Mr. Dhanuka, however, drew my attention to various provisions of different Acts like the Maharashtra Housing and Area Development Act, 1976, Essential Commodities Act, Sales Tax Act and Employees' Provident Funds Act in support of his contention that the Directors of the company cannot be made personally liable unless there is express provisions to that effect. I do not find merit the in the said contention.
Section 49(3) of the Societies Act makes it very clear that the employer could be proceeded against personally for recovery of arrears of wages and therefore it is not necessary to refer to the provisions of the Essential Commodities Act or Sales Tax Act. etc. Further even under Section 49 of the Societies Act read with Section 3 of the Payment of Wages Act the employer could be proceeded against personally for recovery of wages as arrears of land revenue. Section 49(2) of the Societies Act refers to the Payment of Wages precisely for this reason. Section 2(ia) of the Payment of Wages Act defines the word employer' even to include the legal representative of a deceased employer. Even under the provisions of the Factories Act or even Employees' State Insurance Act, the ultimate control of the company which is the owner of the establishment or the factory could vest in the Directors and in the absence of nomination the Directors could be held jointly and severally responsible for non-payment of the dues of the workmen. In this connection, it may also be noted that even on the facts of the case, till to-day there is not a single letter even addressed to the Deputy Registrar even prior to 1986 pointing out as to who was in the ultimate control of the affairs of the establishment or the factory. The names of the nominated Directors or the Managers were also never submitted to the appropriate authority and even in the petition there is no reference to the names of the nominated Directors or the Managers who could be held responsible as an employer under Section 49(3) of the Maharashtra Co-op. Societies Act. In the absence of any of the said particulars petitioners are liable jointly and severally to pay the demanded amount. In any event, the petitioner Nos. 1, 2 and 3 are not entitled to any sympathetic consideration for the reason that the material facts have not been either indicated in the petition nor those facts submitted to the competent authority under the provisions of the Maharashtra Co-op. Societies Act or the Land Revenue Code, 1966. Even to-day petitioners 1, 2 and 3 are not in a position to pay even the admitted amount which is payable to the workmen whose moneys they have used for over years and the default has been admittedly committed by them as mentioned in the agreement referred to hereinabove. In the circumstances, apart from the question of law I do not see any reason for interference under Article 226 of the Constitution of India.
8. Mr. Dhanuka for the petitioners, however, submitted that the petitioner Nos. 4 and 5 are Finance Manager and General Manager-cum-Secretary respectively of the company and in any event they are not falling within the ambit of Section 49(1) of the Societies Act. Mr. Dhanuka submitted that they are not the employers and therefore they cannot be made liable under the said provisions. On the other hand Mr. Dharmadhikari submitted rightly that since the expression 'employer' in Section 49 is to be read in widest possible term, it would not be proper to exonerate the petitioners 4 and 5 totally from the liability which has accrued in the present case. He further submitted that it will depend upon the facts of each case whether the persons similarly situated as the petitioners 4 and 5 would fall within the ambit of Section 49(1) of the Act and therefore according to Mr. Dharmadhikari the petitioners 4 and 5 should not be completely exonerated from the liability. It is true as contended by Mr. Dhanuka that the Deputy Registrar has not ascertained the exact status and nature of the control which the petitioners 4 and 5 exercised at the relevant time in the affairs of the company. Mr. Dhanuka also submitted that to that extent there is no finding of fact recorded by the Deputy Registrar, Co-op. Societies, with regard to the liability of petitioners 4 and 5. To that extent alone this writ petition is being allowed and the matter is being remanded back to the Deputy Registrar only to ascertain as to whether the petitioner Nos. 4 and 5 had the ultimate control along with other Directors of the company and whether they would fall within the ambit of Section 49(1) of the Maharashtra Co-op. Societies Act, 1960. It is made clear that in view of the above facts and in view of the agreement dated April 13, 1980 the liability has been acknowledged by the company and in the absence of any specific averment to the contrary, the only issue for which the matter is remitted is to ascertain as to whether petitioners 4 and 5 were in charge of the affairs of the company or not along with petitioners 1, 2 and 3.
9. In the circumstances, writ petition is partly allowed.
To sum up it is hereby directed :
(A) that petitioner Nos. 1, 2 and 3 are liable to be proceeded against under Section 49(3) of the Maharashtra Co-op. Societies Act, 1960 read with Section 267 of the Maharashtra Land Revenue Code, 1966 or any other proceedings which the appropriate authority may seek to invoke;
(b) that the petitioners 1, 2 and 3 as Directors of the company are personally liable jointly and severally under Section 49(3) of the Maharashtra Co-op. Societies Act, 1960 pursuant to agreement dated April 13, 1980.
(c) As regards petitioner Nos. 4 and 5 the matter is being remitted back to the Deputy Registrar, Co-op. Societies, who will decide the matter as indicated above in accordance with law and ascertain as to whether the said petitioners 4 and 5 had ultimate control in the affairs of the company at the relevant time with the Directors including petitioners 1, 2 and 3. The Deputy Registrar will hear the concerned parties and decide the matter in accordance with law as mentioned above. The amount of liability will not be decided by the Dy. Registrar. Only to extent indicate above the petition is being allowed and the recovery proceedings adopted against petitioners 4 and 5 are hereby set aside. Accordingly, notice dated October 29, 1986 issued against Finance Manager Ram Gopal Lata is hereby set aside. However, liberty is granted to the respondents to proceed with the recovery proceedings in the event the Deputy Registrar comes to the conclusion that the said petitioners 4 and 5 were also falling within the ambit of Section 49(3) of the said Act as indicated above.
(d) Respondent No. 4 is at liberty to take any other proceedings pursuant to the agreement (vide Clause 9) dated April 13, 1980.
Rule partly made absolute as indicated above.
In the circumstances of the case, however, there will be no order as to costs.
Mr. Dhanuka requests for stay of this order for a period of six weeks. Mr. Dharmadhikari opposes the application. As the petitioners are desirous of filing an appeal stay of the order for four weeks from today.
Certified copy, if applied for, to be furnished out of turn expeditiously.
June 29, 1992
10. In the above matter the judgment was dictated on June 11, 1992. By the said judgment this Court inter alia came to the conclusion that the petitioner Nos. 1, 2 and 3 are liable jointly and severally to be proceeded against under Section 49(3) of the Maharashtra Co-op. Societies Act, 1960. The operation of the said order was stayed for a period of six weeks.
11. Thereafter the petitioners after giving notice to the respondents filed praecipe dated June 17, 1992 by which this Court was informed that the parties are ready and willing to settle the matter.
12. On June 29, 1992 consent terms duly signed by the relevant parties have been submitted to this Court pursuant to the above praecipe. By the said consent terms respondent No. 2 Society has agreed to accept Rs. 6,00,000/- (six lacs) from the petitioners in full and final settlement of their claims against the petitioners personally. As regards the balance amount liberty is given to respondent No. 2 to recover balance amount with interest at 15% per annum of from respondent No. 5 company in terms of clause (4) of the consent terms. Clause (5) of the said consent terms provides for an undertaking by the petitioners not to dispose of the immovable properties mentioned in the Schedule annexed to the consent terms.
13. The consent terms are taken on record and marked Exhibit 'X'. In the view of the consent terms it is made clear that in the event of the petitioners committing a single default in the matter of payment of instalments as mentioned in clause (2) of the consent terms, the judgment and order dated June 11, 1992 will come into force forthwith and accordingly respondent No. 2 society would be entitled to take steps as per the direction of this Court in the said Judgment. In the event of the petitioners complying with the terms of the said consent terms dated June 29, 1992, respondent No. 2 society as well as the petitioners are given permission to inform the Prothonotary and Senior Master, High Court, Bombay regarding the compliance of the said consent terms.
14. In view of the said consent terms, the judgment and order dated June 11, 1992 will not come into force against the petitioners as indicated hereinabove, till the petitioners comply with the consent terms. It is made clear that the said consent terms will not preclude the respondent No. 2 society from proceeding against the company (respondent No. 5) to recover the balance amount as mentioned in the said consent terms (vide clause 4).
15. Certified copy, if applied for, to be furnished out of turn expeditiously.