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Shripatrao Limbaji Kadam and ors. Vs. State of Maharashtra and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Appln. No. 2016 of 1978
Judge
Reported inAIR1979Bom222; (1979)81BOMLR504; 1979MhLJ267
ActsMaharashtra Co-operative Societies Act, 1961 - Sections 73G, 78(1), 78(2), 78(3) and 78(4); Maharashtra Co-operative Societies Act, 1960 - Sections 78(1); Bombay General Clauses Act, 1904 - Sections 16
AppellantShripatrao Limbaji Kadam and ors.
RespondentState of Maharashtra and ors.
Appellant AdvocateA.V. Savant, Adv.
Respondent AdvocateC.J. Sawant, Addl. Govt. Pleader and ;W.N. Yande, Asstt. Govt. Pleader,
DispositionPetition allowed
Excerpt:
maharashtra co-operative societies act (mah. xxiv of 1961), section 78(1) - nature of the authority or power of the director of sugar and additional registrar, co-operative societies, maharashtra state of appointing committees or administrator under section 78(1)--challenge to appointment of administrator to be in charge of co-operative society after the registrar has formed an opinion that the committee appointed under section 78(1) has acquitted itself well and that a situation contemplated under section 78(3) has arisen requiring elections to be held as early as possible.;the committee appointed by the registrar under section 78(1) with the sole object of improving the administration of the society and to reinstall elected representatives is an extended arm of the registrar. though the.....deshmukh, j.1. this is a petition by thirteen members of the committee of the sakhar karkhana which itself is petitioner no. 14. this petition has been filed to challenge the order ex.-d to the petition dated the 25th of august 1978 passed by the director of sugar and additional registrar, cooperative societies, maharashtra state, poona-9. by this order the appointment of the committee of petitioners nos. 1 to 13 has been terminated and one k.s. jaiswal, district deputy registrar, co-operative societies, beed, has been appointed administrator of petitioner no. 14 karkhana for the period ending with the 31st of december 1978 or till the elected board of directors of the karkhana is formed and assumes charge, whichever is earlier.2. most of the facts are undisputed. the dispute relates to.....
Judgment:

Deshmukh, J.

1. This is a petition by thirteen members of the committee of the Sakhar Karkhana which itself is petitioner No. 14. This petition has been filed to challenge the order Ex.-D to the petition dated the 25th of August 1978 passed by the Director of Sugar and Additional Registrar, Cooperative Societies, Maharashtra State, Poona-9. By this order the appointment of the committee of petitioners Nos. 1 to 13 has been terminated and one K.S. Jaiswal, District Deputy Registrar, Co-operative Societies, Beed, has been appointed administrator of petitioner No. 14 Karkhana for the period ending with the 31st of December 1978 or till the elected Board of Directors of the Karkhana is formed and assumes charge, whichever is earlier.

2. Most of the facts are undisputed. The dispute relates to the interpretation of the provisions of Sub-section (1) of Section 78 of the Maharashtra Cooperative Societies Act, 1960, and more particularly the powers and rights of the Director of Sugar and the Additional Registrar of Co-operative Socie-ties with regard to the appointment, continuance or discontinuance of the committee appointed under sub-clause (i) of clause (a) of Sub-section (1), of Section 78 or one or more administrators appointed under Sub-clause (ii) of clause (a) of Sub-section (1) of Section 78 of the same Act. Admittedly, petitioner No. 14 as a co-operative sugar factory was registered on the 14th of June 1974. The first meeting of this society was called on the 15th of July 1974. It was adjourned to the 20th of July 1974. On that day, as per provisions of the Co-operative Societies Act and the by-laws of the Society, a board of twelve members was nominated by the general body till the regularly elected Board of Directors took over the management. By about the 28th of September 1975, nine out of the twelve members resigned. The quorum for the meeting of the Board of Directors as per the by-laws was one third of the sanctioned strength. It means that a minimum of four Directors ought to be there for forming a quorum of the managing committee. As the Directors that remained after nine persons resigned were only three, there was no possibility of having a quorum and hence no possibility of the managing committee meeting lawfully for transacting any business. The Director of Sugar, therefore, thought that a situation had arisen in which a majority of the members had ceased to perform their functions and the business of the Society had or was likely to come to a stand still. Since he formed this opinion, he acted under Sub-section (1) of Section 78 and issued show cause notice to the remaining three members. He accepted their explanation, heard them and naturally concluded that the business of the Society could not be carried on lawfully and the remaining three members must be removed from the Board of Directors. Accordingly, he removed them. When the Registrar takes this action under Sub-section (1) of Section 78, he is further obliged to pass an order for appointing a committee consisting of three or more members of the Society in the place of the old committee or to appoint one or more administrators who need not be members of the Society. Accordingly, respondent No. 2 passed anorder dated 12-12-1975 Ex. A to the petition. Under this order, which is expressly stated to be under Section 78 (1) (a) (i), he appointed a committee of ten members. Their period of appointment was initially for one year from the date they assumed charge unless some earlier order was passed terminating their appointment. This committee has all the powers of en elected Board of Directors as per by-laws of the Karkhana. By further order dated 1-1-1977 the period of this committee was extended up to the 31st of December 1977 or until further orders, whichever was earlier. That order is Ex. B to the petition. In March 1977 three more members were added to the same committee. However, two of them resigned and the committee nominated two members in their place on the assumption that it had a right of nomination as well, which is available under the by-laws to the elected Board of Directors. Mr. C. J. Sawant, the Counsel representing the respondents, has some doubt about the legality and correctness of this procedure, but that point is not relevant at all for the decision of this petition and has not been either argued or considered by us.

3. In October 1977, the existing committee requested respondent No. 2 to further extend its period till the end of 1978, but no specific order has been passed in that behalf. The committee has just continued to function, as no specific orders were passed by respondent No. 2.

4. Later on, the committee Itself conducted some correspondence with respondent No. 2 as well as the Government of Maharashtra. The committee felt that the time was opportune for holding the elections under the by-laws and to hand over the administration to the regularly elected representatives instead of a nominated committee by the Director of Sugar. This approach, in principle, seems to have been accepted by the Registrar viz., respondent No. 2. but instead of requesting the Collector to hold the elections under Chapter XI-A of the Maharashtra Co-operative Societies Act, he passed the impugned order dated the 25th of August 1978, by this order he replaces the committee of peti-tioner No. 1 by an administrator who is a Government officer and lays down the period of the appointment of the Government officer till the end of the 31st of December 1978 or even earlier If a Board of Directors is elected for the Karkhana. It is this order of replacing the committee by an administrator which is being challenged by the petitioners.

5. Two questions really arise for our consideration as canvassed on behalf of the respondent. The first is what is the real nature of the authority or power of respondent No. 2 in the matter of appointing committee or administrators under Sub-section (1) of Section 78 and the second point is whether the action proposed to be taken under the impugned order is lawful one.

6. The main argument that has to be tested in this case is whether the Registrar has an absolute right to change the composition of the committee from time to time or to replace one committee by another or to remove the committee and replace it by an administrator at any time he chooses or vice versa. Whereas the Registrar claims an absolute right, according to the learned Counsel for the petitioners, he is guided and controlled by the provisions of Section 78 and cannot act beyond it. What precisely, therefore, Section 78 says about the Registrar's role has to be found out.

7. Sub-section (1) of Section 78 contemplates that the committee of a society or any member of that committee is guilty of the various irregularities and misdeeds described in that Section. Any one of them, if proved, permits the Registrar to remove that member and replace him or to remove the committee as a whole and make alternate arrangements for the administration of the affairs of the society. In fact, the provisions of Sub-section (1) of Section 78 require him to pass a composite order after hearing the existing committee. If he concludes after hearing it that the executive committee requires to be removed, he will do so by an order and by the latter part of the same order he is permitted to appoint another committee or administrators as provided by clause (a) of Sub-section (1) of Sec-tion 78. That clause is reproduced here for ready reference.

'..... by order

(a) remove the committee, and

(i) appoint a committee, consisting of three or more members of the society in its place, or

(ii) appoint one or more administrators who need not be members of the society, and who may be individuals or a corporation (including a company owned or controlled by the State or a subsidiary company thereof), to manage the affairs of the society for a period (not exceeding two years) specified in the order, which period may, at the discretion of the Registrar, be extended from time to time, so however, that the total period does not exceed four yeans to the aggregate;'.

Some confusion was initially created before us because the section uses the same word 'committee' while describing the existing committee to be removed and the new committee to be appointed under Sub-clause (i), The Counsel for the petitioners argued at one stage that the word 'committee' used at any place in the whole Section must be deemed to have the same connotation and cannot be attributed different meanings, On closer examination, we find that It is not possible to accept this argument. The committee that is contemplated by the opening clause of Sub-section (1) of Section 78 is obviously a committee of the society constituted as per by-laws thereof. It could be the first committee which has limited life till the elected committee takes over or it could be the regularly elected committee which has a five years' life so far as the sugar producing co-operative society is concerned. It is that committee which has not conducted the affairs well and is found guilty of one of the various clauses that follow in that Sub-section, Once that situation develops and the Registrar follows the procedure of issuing show cause notice and satisfying himself after hearing the members an occasion arises for the removal of that committee by an order of the Registrar. Once that regular committee as per 'by-laws is thus removed, the Registrar has a choice under sub-clause (i) or (it) either toAppoint a committee or to appoint an administrator. The committee could consist of three or more members who are all members of the society. If the Registrar chooses to appoint a committee under Sub-clause (i), as the choice is limited to the members of the Karkhana, he cannot appoint an outsider, However, the composition of tha committee could consist of any number but not less than three. This number of the members of the committee has no relationship whatsoever to the members which the 'by-laws of the factory may prescribe. The composition of the committee under the bylaws is again controlled by the various provisions of the by-laws themselves. In the case of the present factory, for instance, certain interests have to be reflected by giving representation including a backward class candidate and a scheduled caste candidate. These restrictions are not relevant when the Registrar appoints a committee under Sub-clause (i) for the purpose of managing the affairs of the society. Instead of a committee, if the Registrar chooses to appoint one or more administrators under Sub-clause (ii), It need not be repeated that the above provisions of the by-laws of the society will have no relevance whatsoever. The reason Is obvious. If the working of a society has deteriorated and the elected representatives are required to be removed from management, the purpose is to improve the working by appointing either an administrator or a committee to bring about normalcy where election and re-entrustment of the administration to the elected representatives will become possible. The Legislature has therefore, laid down th' optimum period of four years for such interim arrangement. The appointment of a committee Or the administrator cannot be for a period exceeding two years In the first instance, 'but the period can be extended from time to time so as not to exceed four years In the aggregate. We will hereafter confine our discussion to a committee only, as we are dealing with the appointment of a committee. This is the positive provision for the appointment of a committee with the sole object of improving the administration of the society and to reinstall elected representatives.

8. What is the real nature of this committee? It is, in our view, an extended arm of the Registrar, Sub-section (2) of Section 78 clearly lays down that the committee so appointed shall, subject to the control of the Registrar and to such instructions as he may from time to time give, have power to exercise all or any of the functions of the committee or of any officer of the society and take all such action as may be required in the interests of the society. Though the appointed, committee has all the powers of an elected committee, the exercise thereof is under the strict control and supervision of the Registrar. It is bound to obey every direction of the Registrar. The second part of that Sub-section says that the committee will have a further right to call a special general meeting of the society to review or to reconsider the decision or the resolution taken or passed at the general meeting called by the previous committee or to endorse actions taken by it. This power has been given to the appointed committee notwithstanding anything contained in the by-laws of the society. Sub-section (2A) need not be referred to at all, as it deals with the remuneration of the administrator. Sub-section (3) contemplates a situation where the Registrar holds a certain view and is obliged to take a certain action. It is necessary to examine this Sub-section more carefully, as it appears to be in a way a guideline to the Registrar to conduct himself in a certain manner as also a restriction on his absolute right to appoint or re-appoint the committee or the administrator. That Sub-section says that;

'If at any time during any period, or extended period referred to in subsection (1), it appears to the Registrar that it is no longer necessary to continue to carry on the affairs of the society as aforesaid the Registrar may, by an order direct that the management shall terminate; and on such order being made, the management of the society shall be handed over to a new committee duly constituted.'

The scheme of this Sub-section is in a way similar to the scheme of subsection (1). Sub-section (1) contemplates a certain situation where the existing Board of Directors or themanaging committee is to be removed. The moment removal is contemplated, the Registrar is obliged to appoint either a committee, or an administrator. The order has to be composite. A void cannot be created in a society, If one administration is being superseded, another set-up must be immediately replaced. In the same way, the scheme of Sub-section (3) gays that during the administration through the appointed committee a situation may develop when the affairs of the society improve. They improve to such an extent that it appears to the Registrar that It is no longer necessary to continue to carry on the affairs of the society as per earlier Sub-sections viz., (1) and (2). If the society has shown progress and normalcy has been restored, the Legislature contemplates that on the formation of that view by the Registrar, he will pass an order by which the management shall be terminated. However, the consequence immediately stated is that on such order being made, the management of the society shall be handed over to a new committee duly constituted. Which is this committee and what is Its due constitution? Here again, the word 'committee' used towards the end of Sub-section (3) is the regularly constituted committee as per by-laws of the Co-operative society. If it were not so, there was already a committee of management appointed under clause (a) of Sub-section (1) of Section 78. Subsection (3) is not meant to substitute one appointed committee under clause (a) by another. In fact, the very appointment and continuance of an appointed committee under clause (a) is the result of the deterioration of the affairs of the society. If that situation has improved and the society has now shown progress, the appointed committee has to be replaced by the elected committee which is the committee contemplated by that word used at the end of Sub-section (3). In fact, whenever a time-limited order is made by the Registrar, the Legislature assumes that the appointed committee will in fact improve the affairs of the society. If the time allotted is not found enough, the Registrar can extend ft from time to time up to a limit of four years. Such a committee or the administrator is expected to hold elections according to the by-laws in such a manner that the elected committee is ready to take over from them at the expiry or termination of their term. That is what is contemplated by Sub-section (4). Due to the peculiar situation of the emergency and the postponement of elections of the committees of the specified societies, a situation developed where, before the expiry or termination of the period of the appointed committees, elections of the regular committees under the by-laws could not take place. By adding a proviso to Sub-section (4) that situation was met with by the Legislature by providing an automatic extension of life to the appointed committee, provided not holding the elections of the committee was beyond the control of that committee. When laws are passed prohibiting elections, it is obvious that it was beyond the control of the committee to hold elections and keep an elected committee ready for taking over administration. This is the total scheme of Sub-sections (1) to (4) of Section 78 which are relevant for our purpose.

9. What is, therefore, the nature of the Registrar's right in appointing committees or administrators? For the purpose of removal of the committee, the only provision is Sub-section (1) of S. 78. If the committee which is to be removed under Sub-section (1) of 78 is a committee under the by-laws of a co-operative society, the committee appointed by the Registrar under clause (a) would not answer that description. The provisions of Sub-section (1) of S. 78 would not, therefore, apply to such an appointed committee. Neither in the scheme of Section 78 nor elsewhere any provision has been laid down for the removal of this appointed committee under clause (a) of Sub-section (1) of Section 78. The learned Counsel for the petitioners, therefore, argued that once a committee is so appointed, it must automatically continue until the situation contemplated by Sub-section (3) develops or a period of four years expires. The Registrar cannot remove this committee or a member thereof or add to and subtract from the composition of this committee. The learned Counsel for the respondents, on the contrary, argues that the Legislature has advisedly only dealt with the right of the Registrar to appoint a committeeor to appoint one or more administrators. It has not made any further provision for the obvious reason that S. 16 of the Bombay General Clauses Act, 1904, will automatically take care of the situation. It was not considered necessary to make any further provision. If the Registrar had the right to appoint, he undoubtedly had the right to terminate the appointment and to remove them. The impugned order dated the 25th of August 1978 purports to be passed under that authority or power of the Registrar. Keeping aside the order for the time being, this argument must be first tested. The learned Counsel on either side conceded that there is no specific provision at all for the purpose of removing the committee or the administrator appointed under clause (a) of Sub-section (1) of S. 78. It is true that the learned Counsel for the petitioners made an attempt to argue that the committee under clause (a) is the same as the committee in the opening part of Sub-section 41 of Section 78. Our earlier discussion is a clear answer to this argument. We are unable to accept such an interpretation. Besides this, no other provision is brought to our notice, which deals with the Registrar's right to terminate the appointment of a committee or to remove one or more members from the committee and replace them with some others. Looking to the scheme of Section 78, we are inclined to hold that the Legislature has advisedly referred to the power of appointment of the Registrar and has left the matter there without making further provisions. Section 16 of the Bombay General Clauses Act, 1904, would be automatically attracted to the situation. The Registrar's right to appoint includes his right to terminate the appointment.

10. Is this right so absolute that the Registrar can terminate the appointment of the committee as and when he likes and with or without reason? There we find that the scheme of S. 78 read as a whole implies one restriction upon the right of the Registrar. The very function or purpose of appointing a committee or administrator is to set right the mismanagement of a co-operative society and to restore normalcy in its administration. In fact the very right of the Registrar to remove the elected body flows from the fact that the committee is found guilty of either of thesituations described in Sub-section (1) of Section 78. Unless some charge can be leveled against the committee and held proved, the Registrar is not supposed to interfere with the normal administration of a co-operative society. If he finds that some defect has developed as contemplated by Sub-section (1) of Section 78 and the only remedy is to remove the committee and replace it by the administrator or the committee of his choice, he is authorised to take that action. That action is again contemplated with & view not to perpetuate the appointed administrator but to see that in a period which should normally not extend beyond four years the elected representatives are able to take over the administration of their own society. So long as, therefore, the situation requires that the administrator or the committee under clause (a) of Sub-section (1) of Section 78 must continue the administration for the purpose mentioned above, the Registrar has an absolute right to appoint either an administrator or a committee. If that right of appointment is co-extensive with the situation during that entire period, the right of termination which flows from Section 16 of the Bombay General Clauses Act is also available to him.

11. This logically leads to the conclusion that as and when the administration of the society has so improved that ushering in the elected representatives is now necessary and that is the view of the Registrar, he is obliged to act under Sub-section (3) and not to use his powers under Sub-section (1) or (2). Sub-section (3), therefore, clearly says that if at any time during the period referred to in Sub-section (1) (which obviously means the optimum period of four years), it appears to the Registrar that it is no longer necessary to continue to carry on the affairs of the society as aforesaid, the Registrar may, by an order direct that the management shall terminate. The moment the Registrar thinks that the affairs need not be administered under Sub-section (1) of Section 78, he has to terminate the appointed management. It also follows that there must be someone to take over the administration from the appointed management. The second part of that Sub-section, therefore, lays down that on such order being made, the management of the society shall be handed over to anew committee duly constituted. This duly constituted committee is obviously the elected committee under the bylaws of the society. Except in the last situation the right of the Registrar to appoint includes his right to terminate the appointment and these two aspects of the same right vs. positive and negative, are both available to him so long as the situation warrants the continuance of the administration under Sub-section (1) of Section 78. We, therefore, accept the argument of the learned Counsel for the respondents that within the limits of time and situation discussed above the Registrar's right of appointment is absolute. That right also Includes the right to terminate the appointment. He is not obliged to give any reason for the termination of the appointment nor is he obliged to give any opportunity to be heard to the appointed committee or administrator However, this absolute right comes to an end the moment the situation permits the society's affairs to be handed over to an elected body and in that case he has to merely terminate the appointed management and hand over to the elected body. In fact, the moment it begins to appear to him that nor-merely has been restored, he must direct the management appointed by him to hold the elections. He has a right to give any directions as contemplated by Sub-section (2) of Section 78. If the society is of a type where the committee cannot hold elections, it is the duty of the Registrar to request the outside agency like the Collector under Chapter XI-A to hold the elections and to keep a managing committee ready for taking over the administration from the appointed management. With this limitation in one kind of situation we read no limitation upon the right of the Registrar to appoint, terminate or re-appoint either an administrator or a committee under Sub-section (i) and (ii) of clause (a) of Sub-section (1) of Section 78.

12. If this is the clear legal position under Section 78, we will have to examine the facts and circumstances of the present case for the purpose of examining the legality of the impugned order. The petitioners are the members of an appointed committee by the Registrar. II the Registrar were of the view even in August 1978 that the administration of the society must still continue underthe appointed management, undoubtedly, he could have just terminated this committee and appointed another in its place. A further aspect of facts is available in the present case; but since we are not called upon to discuss that aspect, we will merely mention a factual circumstance and not discuss it further. The present committee members have proved that the Registrar's selection in appointing them was proper. They have not only improved the society's administration, but are recipients of a compliment from the Registrar. As the affidavit shows, the Registrar has been fair enough to concede that the petitioners have conducted the affairs well and improved the affairs of the society, Though he has not admitted in terms, the contents of his impugned order dated the 25th of August 1978 themselves disclose that the Registrar has now formed an opinion that the continuance of an appointed management is no longer necessary in the society, but the elected representatives ought to be permitted to take over the administration. In fact, his affidavit discloses that the Registrar wants to hold the elections, as early as possible, but during the brief period of 60 days when the election takes place, he wants an independent and impartial administrator in charge of the society. This part of the reasoning of the Registrar has not ait all appealed to us. It is not always necessary that a Government officer must remain in charge of any institution where elections have to take place. If the present appointed management has acquitted itself well and hag induced the Registrar to form an opinion that elections required to be held as early as possible, a situation contemplated, by Sub-section (3) of Section 78 has arisen so far as the facts and circumstances of the case are concerned. If this Is the factual situation, the Registrar is obliged to act in his discretion under Sub-section (3) and not resort to his powers under Sub-section (1) under his supposed notion of having an impartial Government Officer in charge of the society at the time of the election. Our discussion earlier shows that in the event of a situation contemplated by Sub-section (3) arising, a limitation is automatically put upon the Registrar's right of absolute appointment and re-appoint-meat under Sub-section (1) and he is obliged to terminate the present management only with a view to hand over to the new committee duly constituted. How can that be done? The solution is simple. He is not to remove the present committee but to request the Collector to hold elections as early as possible, as petitioner No. 14 society is a specified society under Section 73G of the Maharashtra Co-operative Societies Act, The normal period taken for elections is 60 days or thereabout. If we look at the impugned order, it says that the present committee be replaced by an administrator and that administrator's appointment is only till the end of Dec. 1978 or even earlier if the Board of Directors of the Karkhana is elected. The impugned order has inherent material which suggests that the Registrar has already formed an opinion that early elections are called for in the society as the malady is already cured. Even if the time now contemplated by the Registrar is taken into account, it was clearly a period of four months from the date of his order. If elections take as much as two months, we are satisfied that the Registrar in this case has already come to the conclusion while passing the order dated the 25th of August 1978 that a situation contemplated by Sub-section (3) of Section 78 has already arisen in this case and immediate elections is the only solution invited. He seems to be keen on holding the elections, but in the meanwhile he wants an administrator to be in charge of the society. This, to us, is a step contrary to the provisions of sub-sec, (3) of Section 78 and the Registrar ought not to have passed such an order. In our view, therefore, though a committee appointed under Sub-section (1) has no vested right to continue and is normally amenable to the Registrar's order of appointment and reappointment, if the situation has reached a stage In Sub-section (3), it does get a right under the statute to continue only until the elected body takes over from it. By the impugned order the Registrar is doing violence to this acquired statutory right of the committee though initially it has no vested right as the members of the administration. This being our view, we think that the impugned order must be struck down. On the contrary, the Registrar must be directed to request the Collector to hold earlyelections and as soon as the elected body is ready to take over, the appointment of the present committee may be [terminated under Sub-section (3) of Section 78 to enable it to hand over to the elected committee,

13. We, therefore, allow this petition and make it absolute in terms of prayers (b) and (c). We also make the rule absolute in terms of prayer (d) but qualify it by saying that the life of the present committee will be only till an elected Board of Directors takes over from it under Sub-section (3) of Section 78. In that case and on that situation arising, the Registrar will terminate its appointment to enable the elected body to take over. In the circumstances, there shall no order as to costs.

14. Order accordingly.


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