Kerala High Court
P.V. Devassy vs The Deputy Registrar Of Co-Operative ... on 5 February, 1973
Equivalent citations: AIR 1974 KERALA 95
ORDER M.U. Issac, J.
1. The petitioner is a member of a registered Co-operative Society, the 2nd Respondent herein. By a resolution dated 21-3-1970. this Society decided to transfer all its assets and liabilities in favour of the 3rd Respondent, which is another registered Co-operative Society. The 3rd Respondent also passed a corresponding resolution on 19-4-1970 for a taking over of the assets and liabilities of the 2nd Respondent It is not seriously disputed that these resolutions had the approval of the Deputy Registrar of Cooperative Societies Trichur who is the 1st Respondent. It is evidenced by Ex R1 a letter dated 24-10-1968 of the 1st Respondent. Sometime after the aforesaid two resolutions were passed, the 3rd Respondent took over all the assets and liabilities of the 2nd Respondent Then the 1st Respondent passed an order Ext. P2 dated 16-12-1970 stated to be under Sections 14 (a) and 15 (1) of the Kerala Co-Operative Societies Act 1969 (hereinafter referred to as the Act). The operative portion of that order reads:
"The assets and liabilities of the Arimpur Karshaka Sahakarana Sangham Ltd. No. R186 shall be transferred in whole to the Arimpur Multi Purpose S. C. S. Ltd. No. 500 as per Section 14 (a) of the K. C. S. Act 21 of 1969 The amalgamation should be given effect to within one month from the date of this order.
The registration of the Arimpur Karshaka Sahakarana Sangham Ltd. No. R. 186 shall stand cancelled with the issue of this order and the society shall be deemed to have been dissolved, and shall cease to exist as a co-operative body as per Section 15 (1) of the Kerala Co-operative Societies Act 21 of 1969."
On 21-12-1970, the petitioner moved this writ petition to quash the above order and restrain the respondents from taking further proceedings on the basis of Ext. P2 and for consequential reliefs,
2. The sole contention of the petitioner before me is that the amalgamation transferring all the assets and liabilities of the 2nd Respondent in favour of the 3rd Respondent was effected without Complying with the provisions of Sub-sections (4) and (6) of Section 14 of the Act and that the impugned order is, therefore illegal and without jurisdiction.
3. Section 14 deals amalgamation, transfer of assets and liabilities and division of societies. It is necessary to read the relevant parts of that section and also Section 15 in order to appreciate the contention of the parties.
"14. Amalgamation, transfer of assets and liabilities and division of societies-
(1) A society may with the previous approval of the Registrar and by a resolution passed by a two-thirds majority of the members present and voting at a general body meeting of the society,--
(a) transfer its assets and liabilities in whole or in part to any other society;
(b) divide itself into two or more societies.
(2) Any two or more societies mav with the previous approval of the Registrar and by a resolution passed by a two thirds majority of the members present and voting at a general body meeting of each such society, amalgamate themselves and form a new society.
(3) The resolution of a society under Sub-section (1) or Sub-section (2) shall contain all particulars of the transfer, division or amalgamation, as the case may be.
(4) When a society has passed any such resolution, it shall give notice thereof in writing to all its members and creditors and, notwithstanding the provisions of Section 24. or any bye-law or contract to the contrary any member or creditor shall, within a period of two months from the date of service of the notice upon him. have the option of withdrawing his shares, deposits or loans, as the case may be.
(5) Any member or creditor who does not exercise his option within the period specified in Sub-section (4) shall be deemed to have given his assent to the proposals contained in the resolution.
(6) A resolution passed by a society under this section shall not take effect until either---
(a) the assent thereto of all the members and creditors has been given or deemed to have been given or
(b) all claims of members and creditors who exercise the option referred to In Sub-section (4) within the period specified therein, have been met in full.
(7) Where a resolution passed by a society under this section involves the transfer of any assets and liabilities the resolution shall, not withstanding anything contained in any law for the time being in force, be a sufficient conveyance to vest the assets and liabilities in the transferee without any further assurance.
(8) xxxxx (9) xxxxx"
"15. Cancellation of registration certificates of societies in certain cases-- (1) where the whole of the assets and liabilities of a society are transferred to another society in accordance with the provisions of Section 14. the registration of the first mentioned society shall stand cancelled and that society shall be deem-
ed to have been dissolved and shall cease to exist as a corporate body-
(2) Where two or more societies are amalgamated into a new society in accordance with the provisions of Section 14. the registration of each of the amalgamating societies shall stand cancelled on the registration of the new society and each amalgamating society shall be deemed to have been dissolved and shall cease to exist as a corporate body.
(3) Where a society is divided into two more societies in accordance with the provisions of Section 14. the registration of that society shall stand cancelled on the registration of the new societies and that society shall be deemed to have been dissolved and shall cease to exist as a corporate body."
4. At the outset. I must point out that there has been a confusion on the part of the 1st Respondent as well as Respondents 2 arid 3 whether what was done in this case was a transfer of the assets and liabilities of the 2nd Respondent to the 3rd Respondent or an amalgamation of the two societies. As a result of the discussion at the Bar. it is agreed that this is really a case of transfer of assets and liabilities in whole of the 2nd Respondent in favour of the 3rd Respondent. The 1st Respondent has used the word "amalgamation" in his orders. Exts. R1 end P2: and it has added to the confusion. Ex. P2 refers to Section 14 (a). There Is no such provision What was intended seems to be Section 14 (1) (a) Counsel on both sides are also agreed that the requirements of Sub-section (1) of Section 14 have been satisfied in this case, since Ext. Rl can be taken as a previous approval of the 1st Respondent, and the resolution passed by the two societies on 21-3-1970 and 19-4-1970 can be taken as the requisite resolutions passed for the purpose of transfer of the assets and labilities of the 2nd Respondent in favour of the 3rd Respondent, though in such a case the resolution of the transferer society is alone required by Section 14 (1) (a).
5. The contention of the petitioner. as already stated, is that notice in writing as required by Section 14 (4) has not been issued by say of the societies to the petitioner or any other member or creditor of any of the societies, and that the issuance of such a notice is mandatorv for the resolution to take effect. The respondents submit in answer to the above contention that the petitioner Is a person who was party to the resolution dated 21-3-1970, and he is, therefore, one who has given assent to the resolution within the meaning of Clause (a) of Sub-section (6). and that the resolution would take effect after the expiry of two months mentioned in Sub-section (4).
6. I am unable to accept the contention of the Respondents. The assent mentioned in Clause (a) in Section 6 is an assent of all the members and the creditors to resolution passed in accordance with Sub-section (1) or Sub-section (2) as the case may be. Sub-section (4) treats all members and creditors alike and gives them a right to get notice of the resolution and to exercise their option for withdrawing the shares, deposits or loans, as the case may be, within the period of two months mentioned therein. It even appears that if a member does not want to continue as a member, it may be open for him to move for the transfer of all the assets of the society to another society, or for its amalgamation with another society. in compliance with the requirements of Section 14 and then to opt to withdraw his shares" and deposits, if any. In my view, every member of a society is entitled to get the notice mentioned in Sub-section (4). even if he was the mover of the resolution. The stage of giving assent to a resolution can arise only after it is passed. Sub-section (5) provides that If he does not exercise his option within the period mentioned in Sub-section (4). he shall be deemed to have given his assent to the proposals contained in the resolution. Sub-section (6) expressly states that the resolution shall take effect only after the assent of all the members or creditors have been given pr deemed to have been given, arid all claims of the members and the creditors are settled in exercise of the option referred to in Sub-section (4). Reliance was placed by the Respondent on Sub-section (7) which provides that the assets and liabilities of the transferring society would stand transferred to the other society by virtue of the resolution, and it was contended that such a transfer would not be affected by virtue of the fact that the notice as required by Sub-section (4) was not issued. I am unable to accept this contention also. The transfer cannot take effect, until and unless the resolution takes effect, and the resolution cannot take effect until the requirements of Sub-section (6) are satisfied. For the reasons stated above. I am constrained to hold that the requirements of Sub-sections (4) and (6) are mandatory. and that they have not been complied with by the respondents in this case.
7. The impugned order. Ex. P2. is purported to have been passed under Sections 14 (1) (a) and 15 of the Act. The only reference in Section 14 (1) to the Registrar is about the previous approval necessary for the resolution mentioned therein Section 15 does not refer to the Registrar at all: and there is no scope for the Registrar to pass any orders under that section. So Ex. P2 is an unwarranted order.
In so far as it directs the transfer of the assets of one society to another and orders the dissolution of the transferring society. These two things are the legal consequences of the action taken in compliance with the requirements of Section 14. But there is one substantial relief that the petitioner is seeking in this case namely to quash the proceedings relating to the transfer of the assets and liabilities of the 2nd Respondent in favour of the 3rd Respondent. I have already held that the transfer has not been done in compliance with the mandatory Provisions of the statute. However, on the peculiar facts of this case. I am not inclined to exercise my jurisdiction under Article 226 of the Constitution to grant him the above relief, since I am satisfied that it would do substantial injustice to most of the members of both the societies except the petitioner, and that at the same time the detriment that the petitioner may suffer by the non-compliance of the statutory requirements for a valid transfer of the assets and liabilities of the second respondent in favour of the third respondent can be properly compensated by suitable direction. The peculiar facts of the case referred to above are that all the assets and liabilities of the second respondent have as a matter of fact, been taken over by the third respondent as early as in January 1971, the second respondent has thereafter ceased to function de facto, and the third respondent has been carrying on all the functions of a registered society without any objection from any person except the petitioner. All that he has suffered by the non-compliance with the issue of the statutory notice as required by Section 14 (4) is that he did not get the period of two months to exercise his option to withdraw his shares, and deposits, if any, from the society of which he was a member. Counsel for the third respondent has agreed to allow the petitioner the same period from this date to exercise such an option, and to pay him off in case he does so. Such a direction must satisfy his legitimate grievance.
8. For the reasons stated above, I dismiss this writ petition with the direction to the third respondent that it shall settle all claims of the petitioner provided he exercises option within two months from this date to withdraw his shares and deposits, if any in the second respondent society. I make no order as to costs.