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Dinkar Tukaram Gajare Vs. Premchand Uttamchand Pagariya and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtMumbai High Court
Decided On
Case NumberSpecial Civil Appln. No. 871 of 1964
Judge
Reported inAIR1965Bom191; (1965)67BOMLR197; ILR1965Bom379; 1965MhLJ343
ActsMaharashtra Co-operative Societies Act, 1960 - Sections 2(13) and 75; Maharashtra Co-operative Societies Rules, 1961 - Rule 22
AppellantDinkar Tukaram Gajare
RespondentPremchand Uttamchand Pagariya and ors.
Appellant AdvocateG.N. Vaidya and ;R.M. Purandare, Advs.
Respondent AdvocateV.H. Gumaste, Addl. Govt. Pleader, M.V. Paranjapa and ;R.A. Jahagirdar, Advs.
Excerpt:
.....rule 22--board of directors of society, election of--whether board of directors to be elected at general meeting of society--applicability of rule 22 to election of directors.;there is no express provision in the maharashtra co-operative societies act, 1960, that the board of directors be elected by a society at its general meeting. in each case it will have to be seen whether by reason of the bye-law made by the society, right to elect directors is given to the general meeting or not. if the bye-laws give a right to the general meeting to elect its directors, rule 22 of the maharashtra co-operative societies rules, 1961, would govern the election of the board of directors. if, on the other hand, the bye-law does not give a right to the general meeting to elect its board of directors,..........has not been noticed by the tribunal. in the instant case, the board of directors have framed rules. rules regulating the election of director have been reproduced at page 22 of the society's publication 'bye laws and rules'. before we advert to the rules, it would be necessary to notice bye-law no.24. clause (1) of the bye-law no. 24 provides that the management of the business of the bank shall be entrusted to a board consisting of not more than 21 directors, sub-clauses (a) to (g) give break up of the 21 directors, representing share holder societies and individual share-holders. representation out of the total number of 21 allowed to the individual share-holders is 3. thus the number of directors representing the individual share-holder is restricted to 3. the rule no.1 relates.....
Judgment:

Tambe, J.

(1) By this petition under Article 227 of the Constitution of India, the petitioner seeks to get quashed the order made by the Maharashtra State Co-operative Tribunal, 6th respondent hereto, on 22-4-1964, setting aside the election of the petitioner to the Board of Director of Jalgaon District Central Co-operative Bank Ltd. the second respondent hereto.

(2) Facts in brief are : The second respondent is a Federal Co-operative Society. Sub-section (13) of S. 2 of the Maharashtra Co-operative Societies Act. 1960 (hereinafter referred to as the Act) defines a 'federal society' thus :

'federal society' means a society (a) not less than five members of which are themselves societies, and (b) in which the voting rights are so regulated that the members which are societies have not less than four-fifths of the total number of votes in the general meeting of such society,'

It would thus be seen that the membership of the federal society consists of shareholders falling under two categories (1) society and (2) individual shareholders. It would also be seen that sub-sec (13) of section 2 requires that voting rights at the general meeting have to be so regulated that the members which are societies have not less than four-fifths of the total number of votes. In other words, the voting rights at the general meeting have to be so regulated that the individual share holder have not more than 1/5th of the voting strength of the total number of votes. To achieve this object, the State Government, in exercise of its rule making power, have framed rule 22 of the Maharashtra Co-operative Societies Rules, 1961. The said rule inter alia, reads :

'22. In the case of federal societies, the voting rights of individual members (which term shall include firm, company or body corporate, society registered under Societies Registration Act, 1880, State Government, local authority, and public trust registered under any law for the time being in force relating to registration of public trust but shall not include a society (Society has been defined in sub-sec, (27) of section 2 of the Act as 'a co-operative society registered, or deemed to be registered, under this Act) may be regulated as follows :

(a) Immediately after the 30th June of every year and, as soon as possible before the annual general meeting, individual members (hereinafter referred to as 'the relevant date'), shall elect delegates equal to one fourth of the number of societies admitted to membership up to the relevant date of one delegate for every twenty-five individual members (fractions being neglected) whichever is less. The delegates so elected will continue in office till their successors are elected after 30th June next.

(b) Every society through its properly authorised representative and every delegate referred to in clause (a) above shall have one vote in the general meeting'.

The other sub-clauses of the rule are not material for the purposes of this case. Now, there was an election held on 30th September 1963 for electing a Director on the Board of Directors of the second respondents from the Jalgaon, Erandol, Parola and Amalner constituency of individual share-holders. The petitioner and respondents Nos. 1,3,4, and 5 were the rival candidates. At the election, voters were cast not by the delegates of the share-holders, but by the individual shareholders themselves. The petitioner secured the highest number of votes, and he was declared as elected on the Board of Directors of the second respondent. Respondent No. 1 lodged a dispute before the Registrar, challenging the validity of the election of the petitioner. The contention raised by him that the election was invalid inasmuch as it was in contravention of the provisions of the aforesaid Rule 22. According to the 1st respondent, the individual share holders were not competent to vote at the election, but, on the other hand, persons competent to vote for the election were the delegates elected by the individual share holders and not the individual shareholders. The Registrar sent the dispute to his nominee for decision. The nominee dismissed the application of the respondent. Against that the first respondent appealed to the Co-operative Tribunal. The Tribunal has allowed the appeal, set aside the order of the nominee, and set aside the election of the petitioner. Hence this petition.

(3) Before us the 1st respondent has not appeared to contest the petition. So also respondents Nos. 3, 4, and 5 who were the contesting candidates, have not appeared to defend the petition. The second respondent is represented by its counsel Mr. Jahagirdar. He has supported the petition. Mr. Gumaste, learned Addl. Govt. Pleader appearing for respondent No. 7, State of Maharashtra, stated before us that the third respondent would submit to the order of the Court. In short he has also not opposed the petition. There is no appearance on behalf of the 6th respondent, which is the Tribunal. We have, therefore, not the benefit of an argument in opposition to the contentions raised by the petitioner. We would, however, take the view taken by the Tribunal as the case of the first respondent, inasmuch as we have been informed that respondents No.4 and 5 have remained ex parte throughout. The view expressed by the Tribunal is founded on the aforesaid provisions of rule 22 and bye-law No. 18 framed by the second respondent society. It would be necessary to reproduce the material part of bye-law 18. Bye-law 18 falls under heading 'General Meeting', so also bye-law No. 24 to which we would advert later. Material part of bye-law No. 18 reads :

(18) The Supreme Authority of the Bank shall be vested in the General Meeting consisting of delegates from affiliated societies, and of all the delegates of members other than affiliated societies. The voting rights of the individual member (which term shall include firm, company of body corporate, society registered under Societies Registration Act, 1860, State Govt. Local Authority, and Public Trust registered under any law for the time being in force relating to Registration of Public Trusts but shall not include a society) shall be regulated as follows :

(1) immediately after 30th June of every year and as soon as possible before the Annual General Meeting, individual members admitted to membership upto the 30th June of the proceeding year hereinafter referred to as 'the relevant date', shall elect delegates equal to one-fourth of the umber of societies admitted to membership upto the relevant date or one delegate for every twenty five individual members (fractions being neglected) whichever is less. The delegates so elected will continue in office till their successors are elected after 30th June next.

(2) Every society through its properly authorised representative and every delegate referred to in serial No.1 above shall have one vote in the General Meeting.'

The other clauses of bye-law 18 are not material for the purpose of this case. It would be seen that the material part of bye-law 18 and material part of the aforesaid rule 22 are similar in terms. Bye-law 19 provides that the General Meeting shall be of two kinds - special and ordinary. Bye law 20 provides :

'An Ordinary General Meeting shall be convened in September every year. Its duties shall be:-

(1) To receive and consider the Annual Report and the State of Accounts of the Board of Directors and to review the work of the Bank during the past year.

(2) To elect as per the rules framed by the Board of Directors and approved by the Registrar for the ensuing year Directors in the vacancies caused by their retirement.

(2A) To elect the Chairman and then the Vice Chairman for the ensuing year.

(3) To review the work of its officers and to hear and decide all appeals from the decision of the Board of Directors.

(3A) No appeal in matters of disciplinary measures taken by the Board of Directors against any member of the staff shall be allowed to be heard by the General Meeting unless two-thirds of the Board of Directors allow such an appeal to be taken to the General Meeting.

(4) To decide the maximum amount of liability which may be incurred by the Bank during the coming year.

(5) To take notice of all subjects which affect the financial position of the Bank or its affiliated societies and to pass resolutions with regard to them.

(6) To consider the audit memo and any business referred to it by the Registrar.

(7) To transact any other business that may be brought up'.

The Tribunal has taken the view that it is the duty of the Ordinary General Meeting to elect the board of directors under bye-law 20. There is nothing in rule 22 or bye-law 18 to differentiate between the different items on the agenda of the general meeting. Therefore rule 22 as also bye-law 18 which regulate the procedure of voting at the general meeting would equally apply to the voting for election of the directors on the board of directors, and in this view of the matter, the Tribunal has held that the votes cast by the individual share holders at the time of election of director was in contravention of the said rule 22 and bye-law 18, and it is in this view of the matter that the appeal has been allowed the election of the petitioner has been set aside.

(4) Mr. Vaidya, learned Counsel for the petitioner, contends the Tribunal was in error in holding that either rule 22 or by-law 18 governed voting at the election of a director on the board of directors. According to Mr. Vaidya, rule 22 and by-law 18 have application only to the voting at the general meeting on topics of general meeting discussed at the general meeting and have no application at all to the election of directors. Though, in our opinion, the petition should succeed, we find it difficult to accept the provisions so widely stated by Mr. Vaidya : nor is it possible for us to accede to the view taken by the Tribunal. In our opinion, as the provisions stand, it is not possible to state categorically either that rule 22 would have application to the election of the directors or that the rule would have no application to the election of directors. Each case will have to be decided on its own facts. It has to be kept in view that in view of the definition of the expression 'federal society' contained in sub-section (13) of section 2, a duty is cast on the State Government to regulate voting rights of its members so that members which are societies have not less than 4/5th of the total number of votes and the members who are individuals have not more than 1/4th of the total votes (in the general meeting of such society). Though the heading of rule 22 is in general terms e.g. 'Voting Rights of individual members in Federal Society clause (b) of the said rule makes it clear that the said rule relates to the voting rights of the individual members 'in the general meeting'. Bye-law 18 framed by the second respondent society, as we have stated, is in similar terms as rule 22. Clause (2) of bye-law 18 also makes it clear that the bye-law relates to the voting right in the 'general meeting'.

(5) The question next arises is whether there is any provision in the Act imposing a statutory obligation on the general meeting of the Society to elect its director? If that be the position, there cannot be any doubt that Rule 22 would have application even to the election of directors. Section 75 of the Act relates of directors. Section 75 of Act relates to the annual general meeting. Sub-section (1) of section 75 provides that

'Every Society shall, within a period of three months next after the date fixed for making up its accounts for the time being in force, call a general meeting of its members'.

The first proviso to sub-s. (1) empowers the Registrar to extend the period for the holding of the annual general meeting. Sub-section (2) casts an obligations on the committee )i.e. the committee for management or other directing bodies to which management of the society is entrusted) to lay at the annual general meeting a balance sheet and profit and loss account for the year in the manner prescribed by the Registrar. Sub-section (3) further casts an obligation on committee to lay at the annual general meeting its report and statement. Sub-section (4) provides that at every general meeting the balance sheet, profit and loss account, the auditors' report and committee's report shall be placed for adoption, and such other business will be transacted as may be laid down in the bye-laws of which due notice has been given. Sub-section (5) and (6) relate to the action that might be taken by the Registrar against officers and members of the society if they fail to call the said general meeting. It would thus be seen that there is no express statutory provision providing that the board of directors be elected by a society at its general meeting. It would, therefore, follow that in each case, it will have to be seen whether by reason of the bye-law made by the society, right to elect directors is given to the general meeting or not. If the bye-laws give a right to the general meeting to elect its directors, it would follow that Rule 22 and the aforesaid bye-law 18 of this society would govern the election of the board of directors. But if on the other hand, the bye-law does not give a right to the general meeting to elect its board of directors, but otherwise provides for the election of the directors, then, in our opinion, neither Rule 22 nor bye-law 18 would have application to the election of directors' and such is the case here. It is indeed true that clause (2) of bye-law 20 states that the duty of the annual general meeting is to elect the directors, but is has to be noticed that what this clause provides is to elect directors as per rules framed by the board of directors and of this clause, it is clear the election of director to the board of directors has to be held in accordance with the rules framed by the board of directors and approved by the Registrar. With respect, if we may say so, due significance of this provision has not been noticed by the Tribunal. In the instant case, the board of directors have framed rules. Rules regulating the election of director have been reproduced at page 22 of the Society's publication 'Bye Laws and Rules'. Before we advert to the rules, it would be necessary to notice bye-law No.24. Clause (1) of the bye-law No. 24 provides that the management of the business of the bank shall be entrusted to a board consisting of not more than 21 directors, Sub-clauses (a) to (g) give break up of the 21 directors, representing share holder Societies and individual share-holders. Representation out of the total number of 21 allowed to the individual share-holders is 3. Thus the number of directors representing the individual share-holder is restricted to 3. The Rule No.1 relates to the qualification of a person who is eligible to the board of directors, and according to clause (ii) of this rule: 'No person shall be eligible to be elected for the office of a Director of this Bank on behalf of the Individual Share-Holders, unless be hold at least one share of the Bank for Rs.100'. Rule 2 relates to the preparation of a list of voters. Rule 3 provides that the 'lists of voters shall be prepared as on the closing date of every co-operative year. Members admitted after that date shall not participate in ensuing election.' It may be stated that the closing date of the year is 30th June. Rule 5 provides that the 'Lists in the case of Individual Share-holders, shall contain the name and father's name of every person entitled to be registered as voter with such other particulars as may be necessary to identify him. Rule 7 relates to the correction of voters' lists. rule 8 provides that 'a final copy of voters of each constituency will be available to members only on payment of Rs. 1 each'. Rule 9 provides that 'there shall be prepared lists of voters for the following constituencies as mentioned in By-law No. 24(1) of the Bank.' By-law 24(1) creates as many as 5 constituencies relating to the election of the Directors and one of the constituencies is individual share-holders. Now, this principal constituency of individual share-holders is sub-divided by Rule 9 into three sub-constituencies as mentioned therein. It may be stated that the talukas of the District of Jalgaon have been distributed in the three constituencies. One of them is Jalgaon, Erandol, Parola and Amalner Rules 18 to 29 relate to the procedure of recording votes, and Rule 27 provide that the voter shall place the voting paper in the ballot box kept for the purpose. These are all the relevant rules which need the noticed for the purpose of this petition. It may also be stated at this age that the validity of these rules has not been challenged before us and was not challenged before the Tribunal.

(6) Now, the position emerging, on the consideration of these rules is clear. For the purpose of electing a Director it is the individual share-holder who gets a rights to vote. It is his name that is entered in the list of voters. Each voter has been given a single vote at the election of the Directors. That, being the position, it is clear that the person who has a right to vote at the election of the directors is the individual share-holder and not his delegate. Bye-law 20 provides that the election of the directors has to be held according to the rules framed by the Board of Directors and approved by the Registrar. It is not in dispute that these rules have been approved by the Registrar. That being the position, in our opinion, the combined effect of bye-law 20 and the rules is that though the election of the Directors is held at the time of the annual general meeting, the election is to be held in accordance with the aforesaid rules framed by the Board of Directors. The rules, as discussed above, confer a right to vote at the election of the Directors on the individual share-holders. The aforesaid Rule 22 or the aforesaid by-law 18, therefore, has no application to the election of the Directors of the Society. With respect it is not, therefore, possible for us to sustain the view taken by the Tribunal. The error of law is apparent on the face of the record. The order of the Tribunal is liable to be set aside.

(7) In the result, line rule is made absolute. The order of the Tribunal is set aside. As no appearance has been put before us in opposition to the petition, there shall be no order as to costs.

(8) Rule made absolute.


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