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Bhavnagar District Co-operative Bank Ltd. Vs. M.M. Joshi, Registrar, Co-operative Societies, Gujarat and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 1311 of 1978
Judge
Reported in[1987]61CompCas318(Guj); (1985)2GLR1087
ActsGujarat Co-operative Societies Act, 1961 - Sections 107, 114(1) and 161
AppellantBhavnagar District Co-operative Bank Ltd.
RespondentM.M. Joshi, Registrar, Co-operative Societies, Gujarat and ors.
Appellant Advocate S.J. Joshi, Adv.
Respondent Advocate B.D. Desai, Assistant Government Pleader
Cases ReferredCollective Farming Society v. State
Excerpt:
.....act, 1961 - whether power to grant exemption under section 161 can be exercised retrospectively - winding up proceedings come to end within three years from date of winding up unless period extended not exceeding four years - liquidation proceedings come to end on expiry of total period of seven years - statute operates prospectively unless legislature intend that it should operate retrospectively - power conferred by section 161 not confined to exemption to be granted in so far as operation of section 114 (1) concerned - once liquidation proceedings come to end there can be no question of commencing winding up proceedings de novo under section 107 - powers cannot be exercised under section 161 retrospectively. - - 6. it is a well-settled rule of construction that a statute..........the liquidator of the said societies. under sub-section (1) of section 114 of the act, the winding-up proceedings of a society have to be closed within three years from the date of the order of the winding-up, unless the period is extended by the registrar which shall not exceed four years in the aggregate. it further provides that immediately after the expiry of seven years from the date of the order for winding-up, the liquidation proceedings shall be deemed to have been terminated and the registrar shall pass an order terminating the same. in the instant case, the winding-up orders were passed in respect of respondent no. 4 on april 28, 1967, in respect of respondent no. 5 on june 20, 1967, and in respect of respondent no. 6 on december 12, 1967. admittedly, the liquidator did.....
Judgment:

A.H. Ahmadi, J.

1. The short question which arises for consideration in this petition is whether the power to grant exemption under section 161 of the Gujarat Co-operative Societies Act, 1961 (hereinafter called 'the Act'), can be exercised retrospectively. In order to answer this question, a few relevant facts may be stated. The petitioner, a co-operative bank, registered under the provisions of the Act, had advanced loans to respondents Nos. 4 to 6 which are service and credit societies also registered under the Act. The said three societies were directed to be wound up under section 107(3) of the Act and the petitioner bank was appointed the liquidator of the said societies. Under sub-section (1) of section 114 of the Act, the winding-up proceedings of a society have to be closed within three years from the date of the order of the winding-up, unless the period is extended by the Registrar which shall not exceed four years in the aggregate. It further provides that immediately after the expiry of seven years from the date of the order for winding-up, the liquidation proceedings shall be deemed to have been terminated and the Registrar shall pass an order terminating the same. In the instant case, the winding-up orders were passed in respect of respondent No. 4 on April 28, 1967, in respect of respondent No. 5 on June 20, 1967, and in respect of respondent No. 6 on December 12, 1967. Admittedly, the liquidator did not submit a report to the Registrar for the termination of the liquidation proceedings within the statutory period and, therefore, by virtue of the proviso to section 114(1) of Act, the liquidation proceedings were deemed to be terminated and an order to that effect was passed by the Registrar on September 1, 1976, in respect of respondents Nos. 4 to 6 and certain other co-operative societies terminating the liquidation proceedings and for cancellation of the certificate of registration of the said societies. Against this order, the petitioner bank filed a revision application under section 155 of the Act wherein it, inter alia, contended that the State Government should exercise power under section 161 of the Act. The said revision application was rejected as is clear from the letter written to the petitioner's advocate dated November 21, 1977, annexure 'J' to the petition. The petitioner bank has, therefore, filed this petition for quashing the order of September 1, 1976 (annexure'I' to the petition), and for such other consequential reliefs as may ensue therefrom.

2. Section 107 empowers the Registrar to make an order directing that a society be wound up and to appoint a liquidator of such society under section 108 of the Act. The order passed by the Registrar can be tested in appeal under section 109 of the Act. The powers of the liquidator have been catalogued in clauses (a) to (o) of section 110 of the Act. Section 113 provides that the accounts maintained by the liquidator shall be audited in the manner the Registrar considers fit. Section 114(1), with which we are concerned next, provides as under :

'114. (1) The winding-up proceedings of a society shall be closed within three years from the date of the order of the winding-up, unless the period is extended by the Registrar : Provided that the Registrar shall not grant any extension for a period exceeding one year at a time and four years in the aggregate, and shall, immediately after the expiry of seven years from the date of the order for winding-up of the society, deem that the liquidation proceedings have been terminated, and pass an order terminating the liquidation proceedings.'

3. It is clear on a plain reading of this provision that the winding-up proceedings come to an end within three from the date of winding-up unless the period is extended which shall not in the aggregate exceed four years. In other words, the initial period of three years and the extended period should not exceed seven years in the aggregate. On the completion of seven years' period from the date of the order of winding-up of the society, the Registrar shall deem that the liquidation proceedings have terminated and pass an order in that behalf. Therefore, on the expiry of the initial period of three years or the extended period not exceeding seven years in the aggregate from the date of the order of winding-up of the society, the Registrar must deem that the liquidation proceedings have terminated and pass an order accordingly. On the efflux of time, therefore, the statute intervenes and by fiction the liquidation proceedings terminate and the Registrar is obliged to pass an order terminating the liquidation proceedings. In the instant case also as the liquidation proceeding were not completed within the initial period, extensions were sought from year to year and were granted for four years in the aggregate and on the expiry of the extended period, that is, on the expiry of seven years from the date of the order of winding-up of the society, the Registrar passed the impugned order on September 1, 1976 (annexure 'I'), terminating the liquidation proceedings. There can be no doubt that in view of the language of the proviso to sub-section (1) of section 114 of the Act, it was imperative on the part of the Registrar on the expiry of the total period of seven years the date of the order of winding-up of the three societies in question, to deem the liquidation proceedings to have come to an end and to pass an order of termination thereof. The order passed by the Registrar on September 1, 1976, is, therefore, strictly in conformity with the requirement of sub-section (1) of section 114 of the Act. The validity of such an order by which the liquidation proceedings came to be terminated cannot, therefore, be doubted.

4. Against this order of September 1, 1976, the bank which was appointed liquidator in respect of the three societies in question, preferred a revision application as provided by section 155 of the act. By the said revision application, the bank, as liquidator, requested the State Government to invoke the power conferred upon it by section 161 of the Act. We may, therefore, look to the said provision which reads as under :

'161. The State Government may, by general or special order, to be published in the Official Gazette, exempt any society or class of societies from any of the provisions of this Act, or may direct that such provisions shall apply to such society or class of societies with such modifications not affecting the substance thereof as may be specified in the order : Provided that no order to the prejudice of any society shall be passed without an opportunity being given to such society to represent its case.'

5. The section, therefore, empowers the State Government to exempt any society or class of societies from any of the provisions of the Act or to direct that such provision shall apply to such society or class of societies with such modifications not affecting the substance thereof. By this provision, wide powers have been conferred on the State Government to exempt any society or class of societies from any of the provisions of the Act or to modify the said provisions in their application to such society or class of societies provided the substance thereof remains unaffected. There can be no doubt that the power conferred by this provision could have been exercised by exempting the three respondent societies from the operation of section 114(1) of the Act, before the statute operated on the efflux of the period of seven years from the date of winding-up of each society. The bank, however, contends that notwithstanding the efflux of the period of seven years and the consequences flowing therefrom by virtue of the proviso to sub-section (1) of section 114 of the Act, it was open to the State Government to invoke the provision of section 161 with a view to exempting the concerned respondent societies from the operation of section 114 of the Act. In other words, the contention urged is that the power to exempt contained in section 161 can be invoked even retrospectively if need be.

6. It is a well-settled rule of construction that a statute operates prospectively unless the Legislature by express words or by necessary implication manifests an intention that it should operate retrospectively. There are no express words in section 161 to suggest that it was intended to operate retrospectively. The power conferred by section 161 is not confined to the exemption to be granted in so far as the operation of section 114(1) is concerned but it is an all-pervading power to exempt any society or class of societies from the operation of any of the provisions of the Act. In the absence of express words manifesting an intention that the said power can be exercised retrospectively, courts would be slow to widen the scope of such a provision by holding that such power can be exercised retrospectively also. Even in the absence of express words suggesting retrospective operation, the court may attribute such an intention to the Legislature if such an intention can be culled by necessary implication. Section 161 which stands by itself is no doubt intended to exempt any society or class of societies from the provisions of the Act but can it be argued that even after a given provision has exhausted itself vis-a-vis the said society or class of societies, the power can be exercised to exempt it from a back date so as to nullify the statutory effect To be precise, by virtue of the application of sub-section (1) of section 114 of the Act, certain consequences ensued on expiry of the aggregate period of seven years, namely, termination of the liquidation proceedings. Can this statutory effect or consequence which ensued on the expiry of the prescribed period be rendered nugatory by the State Government by invoking section 161 of the Act On the termination of liquidation proceedings, the Registrar is duty bound to take further action in the matter and if the power under section 161 can be exercised retrospectively, not only the termination order but all subsequent actions taken pursuant thereto would be rendered nugatory. Such an intention does not appear on the plain language of section 161 of the Act. As stated earlier, section 161 which is of general application empowers the State Government to exempt any society or class of societies from any of the provisions of the Act. Such a wide power conferred on the State Government must be circumscribed and unless there are express words or other circumstances giving rise to the necessary implication that the Legislature intended that the provision may have retrospective effect, it would not be prudent to clothe the State Government with power which would render certain statutory effects or consequences nugatory. If the provision is interpreted as suggested by learned counsel for the petitioner, the power can be exercised at any time after the termination of the winding up proceedings even after the winding up is complete. Such a far-reaching power cannot be read in section 161 of the Act. The power has to be exercised before the statutory consequence set out in the proviso to section 114(1) takes effect. Once the statutory consequence, namely, fiction of the liquidation proceedings having terminated, takes place and the order terminating the liquidation proceedings is passed, the provision is exhausted and there can be no point in exempting any society or class of societies from that provision thereafter. To permit its retrospective exemption would be tantamount to permitting the undoing of what the Legislature intended to do by the deeming fiction. I am, therefore, of the opinion that the contention that the State Government committed an error in refusing to exercise power under section 161 of the Act on the plea that it cannot be exercised retrospectively is without merit.

7. Mr. Joshi, the learned advocate for the petitioner, contended that since the Act was a welfare legislation, it should be given retrospective operation. In support of this contention, he placed reliance on the observations of the Supreme Court in paragraph 11 of its judgment in Registrar of Co-operative Societies v. K. Kunjabmu, AIR 1980 SC 350. However, there cannot be a straitjacket formula that every welfare legislation must necessary be retrospective in effect. The court must look to the language, setting, context and purpose or object for which the said provision was introduced on the statute book. I have pointed out earlier that if the power conferred by section 161 were to be exercised retrospectively, it would render nugatory certain statutory consequences which the legislature intended to follow on the expiry of the period stipulated in section 114(1) of the Act. In the view that I am taking, I find myself fortified by a decision of the Full Bench of the Madhya Pradesh High Court in Collective Farming Society v. State, AIR 1974 MP 59. While dealing with section 91 of the Madhya Pradesh Co-operative Societies Act, 1961, which is substantially the same as section 161 of the Act with which we are concerned, the Full Bench held that the said power could not be exercised with retrospective effect. In paragraph 37 of the judgment, Dayal J. speaking for the Full Bench, observed as under :

'When power is delegated to an authority by the legislature such authority has no power to exercise it with retrospective effect.'

8. These observations support the view I have taken. Besides, in the context of section 114(1) of the Act, it is difficult to understand why the State Government should invoke section 161 retrospectively because the ultimate objective for the same would be to bring about regular termination of the liquidation proceedings which is achieved by the fiction engrafted in the former provision.

9. It was, however, submitted by Mr. Joshi, learned advocate for the petitioner, that the bank had written to the District Registrar to move the Government for exercise of power under section 161 of the Act before the expiry of the period of seven years from the date of winding up. It appears that in respect of respondents Nos. 4 and 5 societies, the bank had written a letter on January 19, 1974, and in respect of respondent No. 6 society on July 30, 1974, a few months before the expiry of the period of seven years, for exercise of power under section 161 of the Act. It is not known whether the District Registrar forwarded the proposal to the State Government but the fact remains that the State Government did not grant exemption from the application of section 114(1) of the Act in respect of the three societies in question. Whether or not to exercise powers depends on the satisfaction of the authority on which the power is conferred. If the District Registrar forwarded the proposals to the State Government, then the only inference is that the State Government did not consider it fit to exercise power under section 161 of the Act. If the District Registrar failed to forward the proposal to the State Government, the fault would not lie at the door of the State Government for failure to exercise power under section 161 of the Act and if it cannot exercise the same retrospectively once the stipulated period expired by efflux of time, it will serve no purpose now to consider what weighed with the Government in not exercising power under section 161 of the Act or with the District Registrar, Bhavnagar, in not forwarding the proposal to the State Government for the exercise thereof. I am, therefore, of the opinion that the order passed by the District Registrar is in conformity with the provisions of the Act and is, therefore, unassailable.

10. Mr. Joshi, the learned counsel for the petitioner, lastly contended that by the impugned order of September 1, 1976, the District Registrar was in error in directing that the surplus amount as shown in the liquidator's balance-sheet of June 30, 1966, should be deposited and the last meeting of the society in question should be called and after having the accounts finally audited, steps should be taken for cancellation of the society. He submitted that once the liquidation proceedings terminate by the thrust of the proviso to section 114(1) of the Act, the society revives and it would be left to the said society to decide whether or not it should apply for cancellation thereof. In this connection, he also invited my attention to section 20(1) which provides that the Registrar shall make an order cancelling the registration of a society if it transfers the whole of its assets and liabilities to another society, or amalgamates with such society, or divides itself into two or more societies, or its affairs are wound up or it has not commenced business within a reasonable time of its registration or has ceased to function. Relying on sub-section (3) of section 20 which provides that the society shall, from the date of such order of cancellation, be deemed to be dissolved and shall cease to exist as a corporate body, Mr. Joshi submitted that on the termination of liquidation proceedings without the final report of the liquidator by mere efflux of time, the society revives and would continue to exist till its registration is cancelled under sub-section (1) of section 20 of the Act. The line of reasoning was that if the society exists, de novo proceedings for winding up of the society can be taken, notwithstanding the termination of the winding up by virtue of the fiction engrafted in section 114(1) of the Act.

11. Now, it must be remembered that when liquidation proceedings terminate under the proviso to section 114(1) of the Act by efflux of time, it is by virtue of the fiction of law, since no final report was received from the liquidator within the time limit fixed by the legislation. It was necessary to create a fiction because the legislature was aware that all formalities for the submission of the final report by the liquidator for termination of the winding up proceedings had not been completed. Since termination of the liquidation proceedings in the normal manner as contemplated by the Act could not be achieved within the stipulated time which the legislature considered reasonable, it had to step in and provide for fictional termination as if all formalities were completed. It is on the strength of the fiction created by the proviso to section 114(1) of the Act that the liquidation proceedings have to be treated as terminated and an order passed to that effect as if the final report of the liquidator is received by the Registrar. If this is kept in mind, it becomes obvious that the District Registrar would be required to direct the convening of the general meeting of the members of the society for the ultimate cancellation of the registration of the society. Once the liquidation proceedings come to an end by virtue of the fiction, there can be no question of the winding up proceedings being commenced de novo under section 107 of the Act. Such an interpretation would render the fictional termination meaningless.

12. For the above reasons the petition fails and is dismissed. Rule discharged with no order as to costs.


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