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Lakha Singh Vs. the Registrar, Co-operative Societies, Punjab, Chandigarh and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ No. 254 of 1972
Judge
Reported inAIR1973P& H13
ActsCo-operative Societies Act - Sections 2, 15-A, 27, 27(2), 55, 55(1) and 56; Orissa Co-Operative Act; Punjab Co-Operative Societies Rules, 1963 - Rules 25, 26 and 45; Civil Services Regulations - Schedule - Article 229; Constitution of India - Article 14
AppellantLakha Singh
RespondentThe Registrar, Co-operative Societies, Punjab, Chandigarh and ors.
Cases ReferredCivil Court. In Thakur Jugal Kishore Sinha v. Sitamarhi Central Co
Excerpt:
.....of the act indicates that the dispute may arise between an officer, like the registrar, and a member of a committee. in such a situation, the registrar or his subordinate officers if duly authorised, might well issue a directive that pro rata loans may be advanced to the applicant members even though their maximum credit limits are much higher. the latter part of this section relates distinctly to the raising of loan exceeding the maximum credit limit. if the conditions mentioned in section 27 are satisfied, then the directive issued by the registrar, may form a valid basis for taking disciplinary action against a committee or any of its members. ' 16. the above mentioned observations clearly lay down that some order had to be made stating therein that the public servant ceased to..........may be stated.3. the petitioner is a member of the bappiana co-operative agricultural service society limited, bappiana (hereinafter called 'the bappiana society'). this society is, in turn, a member of the mansa co-operative marketing-cum-processing society limited, mansa (hereinafter called 'the mansa society'). it was alleged that the managing committee of the mansa society was elected from individual shareholders as also from its constituent co-operative societies. the petitioner was an individual share holder of the mansa society and he was elected as a member of the committee of the said society in his capacity as such. on november 4, 1971, the assistant registrar, co-operative societies, bhatinda, issued a show-cause notice to the petitioner calling upon him to explain why it.....
Judgment:

M.R. Sharma, J.

1. Common questions of law and fact arise out of Civil Writs Nos. 256 and 254 of 1972. These are being disposed of by this judgment.

2. Shri B. S. Khoji, learned Counsel for the Petitioner, has advanced the main arguments in C. W. No. 254 of 1972. Therefore, the facts giving rise to that petition may be stated.

3. The Petitioner is a member of the Bappiana Co-Operative Agricultural Service Society Limited, Bappiana (hereinafter called 'the Bappiana Society'). This Society is, in turn, a member of the Mansa Co-Operative Marketing-cum-Processing Society Limited, Mansa (hereinafter called 'the Mansa Society'). It was alleged that the Managing Committee of the Mansa Society was elected from individual shareholders as also from its constituent co-operative societies. The petitioner was an individual share holder of the Mansa Society and he was elected as a member of the Committee of the said society in his capacity as such. On November 4, 1971, the Assistant Registrar, Co-Operative Societies, Bhatinda, issued a show-cause notice to the Petitioner calling upon him to explain why it should be ordered that the petitioner ceased to be the member of the Committee of the Mansa Society. The allegations in the said notice were that the petitioner was a defaulter of the Bappiana Society inasmuch as he failed to pay Rs. 38/-to the said society in respect of the value of the shares allotted to him. This default is said to have continued from December 30, 1970 to June 29, 1971. The second allegation against the petitioner was that the Bappiana Agricultural Service Society Limited, of which the petitioner was alleged to be a representative, had made a default in payment of Rs. 38012/-on account of short term loan advanced to the said society by the Bhatinda Central Co-Operative Bank Limited, Bhatinda. A copy of this notice is annexed as Annexure 'A' to the petition. It would be pertinent to note at this stage that in the show-cause notice the allegation regarding the realisation of loan beyond the maximum credit limit sanctioned in favour of the petitioner was not mentioned at all and the ultimate actions was taken on the basis of this ground only. The petitioner sent a reply to this notice on November 12, 1971, Annexure 'B'. It was stated therein that the petitioner had been elected as a Director of the Mansa Society in his capacity as an individual share holder, and he could not be visited with evil consequences on account of the default committed by the Bappiana Society concerning non-payment of loan to the Bhatinda Central Co-operative Bank Limited, Bhatinda. The default in respect of the payment of Rs. 38/-towards the share-money was also denied. The Assistant Registrar, vide his order dated November, 25, 1971 came to the conclusion that Rs. 1360.10 were outstanding as loan against the petitioner as on December 22, 1970 when his share-money was only Rs. 100/-. He repaid Rs. 249.30 on December 30, 1970, leaving a balance of Rupees 1110.80. He also placed reliance on a directive said to have been issued by the Registrar, Co-Operative Societies, in exercise of powers conferred upon him under Rule 45 of the Rules framed under the Co-operative Societies Act (hereinafter referred to as 'the Act'). Under this rule, a directive was issued in the following terms:--

'* * * hereby direct that with effect from 1-2-1968 the loan outstanding of the Co-Operative Agricultural Service Societies against any member shall not, at any time, exceed 8 times the share capital paid by him.'

The Assistant Registrar held that the capital of Shri Lakha Singh, the petitioner in the society on December 22, 1970, was only Rs. 100/-and he was entitled to have only Rs. 800/-as loan. In order to save himself from disqualification, either he should have taken loan only eight times of the share-capital or he should have contributed more of share-money commensurate with the loan procured. He had, therefore, made a default either in the payment of share-money or in realising a loan beyond the maximum credit limit sanctioned in his favour. By so doing he had incurred a disqualification under Rule 25(a) of the Punjab Co-Operative Societies Rules, 1963 (hereinafter called 'the Rules'). After coming to this conclusion, the Assistant Registrar held that Shri Lakha Singh, the petitioner, ceased to be the member of the Managing Committee of the Mansa Society.

4. The Petitioner challenged this order, Annexure 'C' of the Assistant Registrar on the following three grounds:--

(1) That he, having denied his liability, could not have been removed from membership unless a dispute was raised and decided under Sections 55 and 56 of the Act.

(2) That, as a matter of fact, he was not a defaulter and the impugned action could not be taken against him. The Assistant Registrar himself had sanctioned a maximum credit limit of Rs. 2925/-in his case for the year 1970-71. He could not be regarded as a defaulter if he raised any amount of loan within this limit.

(3) That the Assistant Registrar was not competent to pass the impugned order.

5. The return in this case has been filed by Shri K. S. Sidhu, Assistant Registrar, Co-Operative Societies, Bhatinda, in which it has been stated that the default of the Bappiana Society towards the Bhatinda Central Co-Operative Bank Limited, Bhatinda, had not been taken into consideration at the time of passing the impugned order, as the same was not a disqualification attaching to the petitioner under the Rules. It was further stated that the directive of the Registrar fixed the maximum credit limit and any member, who raised a loan beyond that limit, incurred the disqualification under Rule 26(a) and (f) of the Rules.

6. Before we deal with the first contention raised by the learned counsel for the petitioner, it becomes necessary to advert to the relevant portions of Sections 27 and 55 of the Act:-

'Section 27(2): Where the Registrar, while proceeding to take action under subsection (1) is of opinion that suspension of the committee or member during the period of proceedings is necessary in the interest of the Co-operative society, he may suspend the committee or member, as the case may be, and where the committee is suspended, make such arrangements as he thinks proper for the management of the affairs of the society till the proceeding are completed:'

'Section 55. Disputes which may be referred to arbitration:--

(1) Notwithstanding, anything contained in any law for the time being in force, if any dispute touching the constitution, management or the business of co-operative society arises:--

(a) among members, past members and persons claiming through members, past members and deceased members, or

(b) between a member, past member or person claiming through a member, past member or deceased member and the society, its committee or any officer, agent or employee of the society or liquidator, past or present, or

(c) between the society or its committee and any past committee, any officer, agent or employee, or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society, or

(d) between the society and any other co-operative society, between a society and liquidator of another society or between the liquidator of one society and the liquidator of another society,

Such dispute shall be referred to the Registrar for decision and no court shall have jurisdiction to entertain any suit or other proceeding in respect of such dispute.

(2)(c) any dispute arising in connection with the election of any officer of the society.'

'Section 56: Reference of disputes to arbitration:--

(1) The Registrar may, on receipt of the dispute under Section 55,--

(a) decide the dispute himself, or

(b) transfer it for disposal to any person who has been invested by the Government with powers in that behalf or

(c) refer it for disposal to one arbitrator

(2) The registrar may withdraw any reference transferred under clause (b) of sub-section (1) or referred under clause (c) of that sub-section and decide it himself or refer the same to another arbitrator for decision.

(3) The Registrar or any other person to whom a dispute is referred for decision under this section may, pending the decision of the dispute, make such interlocutory orders as he may deem necessary in the interest of justice.'

7. A plain reading of Section 55 shows that the Registrar has been invested with the jurisdiction to take cognizance of petitions claiming arbitrations in respect of some specific types of disputes which arise between two parties. Section 56 of the Act enables the Registrar either to decide the dispute himself or to transfer it for disposal to any person who has been invested with the powers of Registrar or to refer it for disposal to one Arbitrator. This section also authorises him to withdraw the reference on his own file and to pass any interlocutory orders which are required in the interest of justice. These powers are analogous to those exercised by a Civil Court. In Thakur Jugal Kishore Sinha v. Sitamarhi Central Co-Operative Bank Ltd., AIR 1967 SC 1494, the Supreme Court had the occasion to interpret the provisions of the Orissa Co-Operative Act, which are in some respect pari material with the provisions of the Act. The Court held that for the purposes of the contempts of court Act the Registrar, Co-Operative Societies came within the definition of the word 'court'. It is not necessary to decide this matter in this case. Suffice it to say that the Registrar while exercising jurisdiction under Section 56 of the Act gives a definite finding in respect of disputes between two parties. Indeed, the very basis of his jurisdiction appears to arise when one party lays a claim against the other. The functions of the Registrar under this section can, by no stretch of imagination, be regarded either as administrative or disciplinary in nature. Section 27 of the Act, however, makes a provision for a wholly different contingency. This section appears in Chapter IV, which is headed as 'Management of Co-Operative Societies.' After providing for the annual general meeting, the special general meeting and the election and nomination of committees, a provision has been made for enforcing disciplinary control over the societies and this control, which is administrative nature, has been invested in the Registrar. Just as in the case of ordinary law of master and servant a master has the right to punish his errant employees, the statute in this case entitles the Registrar to keep watch over the working committees or any member of any of them. In case a committee or a member thereof makes persistent default in the performance of the duties imposed upon it/him by the Registrar himself, or if any of the other contingencies mentioned in Section 27 arises the Registrar, after giving the committee or the member, as the case may be, a reasonable opportunity to state its or his own objections, if any, may either remove the committee or the member by passing an order in writing. It is no doubt true that even while determining the delinquency of a committee or a member thereof under Section 27 of the Act the Registrar also acts in a quasi-judicial capacity but this section does not debar the Registrar to take suo motu action in this behalf. In proceedings under Section 27 of the Act, apart from suspending a committee or removing any of its members, the Registrar cannot burden such committee or a member with any civil liability. This can only be done under Section 56 of the Act on a petition filed by a interested party. If it were to be hold that the Registrar could raise a dispute of the type mentioned in Section 55 and then proceed to try the same, then it could legitimately be urged that he has become a Judge in his own cause. This interpretation would make this section vulnerable to an attack based on Article 14 of the Constitution. Such an interpretation has to be avoided. We are of the view that when the default of a committee or any of its members come to the notice of the Registrar, then he cannot decide this matter under Section 56 of the Act.

8. Shri Kuldip Singh, learned counsel for the respondents, suggests that the word 'officer' appearing in Section 55(1)(c) of the Act indicates that the dispute may arise between an officer, like the Registrar, and a member of a committee. He has brought to our notice the provisions of Section 2 of the Act, in which an 'officer' has been defined as meaning 'president, vice-president, etc. including any other person empowered under the Rules or bye-laws' to give directions in regard to the business of a co-operative society. The argument of the leaned counsel is that since the Registrar is empowered under the Act to issue instructions to a society under Rule 45 of the Rules, a dispute between him and a member of a society would fall within the ambit of Section 55(1)(c) of the Act.

9. This contention is wholly devoid of any force. The word 'officer' used in the said section cannot be read disjunctively with the words 'agent' or 'employee' of a society. Sub-Section (c) of Section 55(1) of the Act when read in a fair manner merely connotes that a dispute between a society and its officer or past officer, by whatever name he may be described would be within the competence of the Registrar.

10. Coming to the second point

'Rule 25. Disqualification for membership of Committee: No person shall be eligible for election as a member of the committee if:--

(a) he is in default to any co-operative society in respect of any sum due from him to the society or owes to any co-operative society an amount exceeding his maximum credit limit;

(b) he has incurred any other disqualification laid down in the bye-laws of the society.'

'Rule 26: A member of the committee shall cease to hold his office as such if he:

(a) continues to be in default in respect of any sum due from him to the co-operative society for such period as may be laid down in the bye-laws;

(b) ceases to be a member,

(c) is declared insolvent;

(d) becomes of unsound mind;

(e) is convicted of an offence involving dishonesty or moral turpitude; or

(f) becomes subject to any disqualification which would have prevented him from seeking election had he incurred that disqualification before election.'

'Rule 45: Directive by Registrar for the successful conduct of business:--The Registrar may, from time to time, issue such directives as he considers necessary for the successful conduct of the business of a co-operative society or class of co-operative societies.'

11. The main point in controversy is that if the petitioner by raising a loan in excess of what he could raise under the directive of the Registrar has committed any default to any co-operative society an amount exceeding his maximum credit limit or not. If the answer to this question is in the affirmative, then this being a disqualification for him to get elected would also debar him to continue as a member under Rule 26 of the Rules. The learned counsel for the petitioner has brought to our notice by-law 30(v) of the Bappiana Co-Operative Society, which runs as follows:--

'Bye-law No. 30(v): without prejudice to the general provisions of the preceding bye-law the general body shall have the following powers and duties:-- The fixing of maximum credit limit for each member provided that such limit shall not be more that that laid down in Registrar's instructions. This limit may be exceeded with the special sanction of the Registrar in each case.'

He has submitted that the credit limit of the petitioner was fixed by the Assistant Registrar at Rs. 2925/-for the year 1970-71. According to him, the bye-law of the Society did envisage that the credit limit of a particular member could be specially fixed. It is not disputed before us that the Assistant Registrar was competent to fix this limit. The petitioner apart from filing a certificate from the President of the Bappiana Society showing his maximum credit limit to be Rs. 2925/-made a specific averment in his petition in this behalf, but the Assistant Registrar did not make a proper denial for the fact that such a limit had been fixed by him in the case of the petitioner. In this view of the matter, applying the law of pleadings, we hold that the maximum credit limit of the petitioner had been fixed at Rs. 2925/-.

12. It has now to be seen whether the directive issued by the Registrar (Annexure 'B' to the return) has ipso facto modified this limit or not. We are of the view that this directive, which purports to have been sent to the Deputy Registrars only, was in the nature of an advice issued to the departmental officers. The directive according to the learned counsel for the petitioner, was never forwarded to the co-operative societies. Even otherwise,. we are of the view that a maximum credit limits is something entirely different. It imposes an embargo upon the amount which a member of the co-operative society may obtain on loan from it. The actual amount of loan to be advanced is, however, a different matter and the same may be governed by matters of policy laid down by the Registrar from time to time. A member may be entitled to have a higher loan and yet it may not be feasible for the society to advance more than half that sum because the funds may not be available with the society. In some cases, there may be many applicants for loans and the funds at the disposal of the society may be much less. In such a situation, the Registrar or his subordinate officers if duly authorised, might well issue a directive that pro rata loans may be advanced to the applicant members even though their maximum credit limits are much higher.

13. Another argument in support of this submission is that the directive is of general application. Bye-law 30(v) of the Society provides that the maximum credit limit of each member shall be fixed in accordance with the instructions laid down by the Registrar, but this limit may be exceeded in case of an individual member with the special sanction of the Registrar. Thus the power of the Registrar, vis--vis, the fixation of maximum credit limit in special cases, can be exercised even by ignoring the general instructions. Since, in the instant case, the maximum credit limit of the petitioner had been fixed by an authority exercising the powers of the Registrar after December 26, 1967, i.e., the date on which this directive was issued, we hold that the said directive cannot modify this limit and bring it down to a sum of Rupees 800/-in the case of the petitioner.

14. When faced with this situation, the learned Advocate-General appearing on behalf of the State submitted that Rule 25(a) should be read in such a manner as to contain two provisions-one of them being a default to any co-operative society in respect of any sum due from a member and the other being the raising of a loan by a member beyond his maximum credit limit. According to him, the petitioner had committed a default in raising a loan beyond the limit set by the directive issued by the Registrar. We must confess that we are unable to read the rule in the manner suggested by the learned counsel. The first part of Rule 25(a) has reference to a different kind of default. For instance, a member of a society may agree to surrender his land to the society if he cannot make payment of the loan on a given date. If he fails to surrender possession on the due date, then he would be said to have committed default. The latter part of this section relates distinctly to the raising of loan exceeding the maximum credit limit. The two provisions have been incorporated in the same Rule in order to meet various contingencies and a fair reading of the rule does not lead to the inference which is suggested by the learned Advocate-General. If the word 'default' used in the first part of the said rule was to be taken to mean all and sundry types of defaults, then the provision relating to the maximum credit, limit would become redundant. We are of the view that by raising a loan which was much below the maximum credit limit of the petitioner, he did not commit a default of the type, which could result in his ceasing to be the member of the society automatically. We may, however, make it clear that it is not our intention to lay down that a committee or any of its members can under no circumstances be proceeded against under Section 27 of the Act on account of any disobedience to the directive issued by the Registrar. If the conditions mentioned in Section 27 are satisfied, then the directive issued by the Registrar, may form a valid basis for taking disciplinary action against a committee or any of its members. As already noticed, the cessation of membership of a committee on the part of a member becomes automatic as soon as the Registrar gives a finding of fact about the matters enumerated in clauses (a) to (f) of Rule 26. For instance, if a member is declared insolvent by a competent court of law, then even the Registrar has no power to order that such a member should continue as a member of the committee. So far as the violation of a directive is concerned, the matters stand on a different footing. The registrar, on receipt of the reply of the committee or a member thereof, may not think it necessary to take disciplinary action against them.

15. The third submission advanced by the learned counsel for the petitioner remains to be dealt with. In this connection he has invited our attention to Annexure 'E' which is a copy of the notification by which the Governor of Punjab was pleased to confer such powers of the Registrar on the various officers of the department as were noted against them. The Assistant Registrars were invested with the powers under Section 27 of the Act so far as they related to the primary societies as defined in Section 15-A of the Act. The powers to take action under Rule 26 have not been conferred upon either the Joint Registrars, or the Deputy Registrars, or the Assistant Registrars. The question now to be seen is whether Rule 26 impliedly contemplated that some authority should give a prior finding about the facts on the basis of which it can be said that a member ceased to be a member or not. The matters relating to the election of the members of a committee of a co-operative society and the rights of the members to manage the affairs of the society are rights which may rightly regarded as analogous to the rights of franchise. Any infringement of such rights by the executive, save in accordance with the provisions of the statute and the Rules on the subject, is to be looked upon with extreme disfavour. In interpreting such provisions, which have the drastic result of denying an elected member his right to manage the affairs of a primary society and in some cases of managing the affairs of the Central and Apex Societies, the Courts should lean in favour of elected members. If some officers of the Department were allowed to assume that a contingency had arisen under which a duly elected member of the society ceased to be a member, then no member would be able to exercise his functions in a reasonable certain manner. Besides, it would conduce to mutual bickerings and introduce utter chaos in the affairs of the society. Whenever a rule lays down that penal consequences shall flow against an elected member on the happening of certain event, then it must be assumed that the law contemplates the existence of an authority to determine whether shankar khanna v. Union of India, 1971 Ser LR 332=(AIR 1971 SC 1085), the Supreme Court had the occasion to consider the effect of Article 229 of the Civil Services Regulations the relevant portion of which runs as under:--

'An officer who remains absent after the end of his leave is entitled to no allowance for the period of such absence, and ceases to have a lien on any appointment.'

While interpreting this provision, the Supreme Court observed as follows:--

'It is pointed out that as the officer concerned ceased to have a lien on any appointment in the circumstances of the case his discharge was almost automatic even though an order had to be made to that effect.'

16. The above mentioned observations clearly lay down that some order had to be made stating therein that the public servant ceased to have any lien on any appointment. When the making of an order is envisaged, then it can safely be inferred that some authority competent to pass that order was also within the contemplation of the Court. If we apply this analogy to Rule 26, then it become obvious that a member does not cease to hold office unless and until a competent authority passes an order in that behalf. It has already been noticed that the powers to take action under Rule 26 have not been conferred upon any subordinate officer of the Department. Since the ultimate control vests in the Registrar, it can safely be inferred that it is he aloe who is competent to pass such an order.

17. Section 27 of the Act, no doubt contemplates the taking of disciplinary action by the Registrar against a committee or its member, but a member would cease to be a member within the meaning of Rule 26 only if he becomes clothed with some of the infirmities mentioned in that rule. In substance, removal from membership and ceasing as a member have the same effect for an elected person. When the legislature in its wisdom conferred the power of removal on the Registrar only, then it would be undesirable to hold that the said authority was not competent to take action under Rule 26. We are of the view that even when a declaration is sought to be given regarding a member under Rule 26, the matter must be decided by an authority invested with the powers of the Registrar.

18. It is admitted case of the parties that the petitioner in this case has been removed from the membership of a Central Society by the Assistant Registrar who was not invested with the Powers of the Registrar under Section 27 of the Act.

19. The result of the above discussion is that the petitioner was neither a defaulter in terms of Rule 26 nor was the Assistant Registrar competent to hold that he (the petitioner) ceased to remain a member.

20. In view of what has been stated above, these petitions are allowed, but in the circumstances without any costs.

S.S. Sandhawalia, J.

21. I agree.

22. Petitions allowed.


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