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Bhogilal Jethalal Patel Vs. Yusufbhai Ramanbhai Gajiwala and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtGujarat High Court
Decided On
Judge
Reported in(1975)16GLR215
AppellantBhogilal Jethalal Patel
RespondentYusufbhai Ramanbhai Gajiwala and ors.
Cases ReferredBank Ltd. v. Dalichand Jugraj Jain and Ors. (supra
Excerpt:
.....what is clearly contained in section 80. it is no doubt true that a person nominated by the state government would hold office during the pleasure of the state government or for such period as may be specified in the order by which he is so appointed. mehta, the learned advocate for the petitioner, that any such state nominee on assumption of the office shall enjoy all rights, discharge the same duties, undertake the same responsibilities and be subjected to the same liabilities, as if he were a member of the committee duly elected. shah has overlooked the legislative intent which has been clearly brought out in the last portion of section 80 of the gujarat co-operative societies act. the term, liability' includes civil as well as criminal liability and it would be the same..........15, 1972. but as it was not repaid upto the date of nomination of the first respondent by the state government on the board of the second respondent-bank, the petitioner herein filed a lavadi case being case no. 1335 of 1973 before the board of nominees of the registrar, co-operative societies, baroda, for a declaration that the first respondent who was nominated by the government of gujarat was not entitled to act as a director and for a permanent injunction restraining him from acting as such. the board of nominees dismissed the suit by its order of january 3, 1974. the petitioner being aggrieved by the judgment and award of the board of nominees took the matter in appeal before the co-operative tribunal of the state of gujarat at ahmedabad by his appeal no. 3 of 1974. the.....
Judgment:

B.K. Mehta, J.

1. A short question arises in this petition, whether the first respondent who was nominated by the Government of Gujarat as its nominee on the Board of Directors of the second respondent-and under Section 80 of the Gujarat Co-operative Societies Act, 1961-was entitled to act as a director and attend the meeting or to vote or participate in the discussion of the Board of Directors. The said question arises in the following circumstances:

2. The second respondent herein is a Co-operative Bank registered under the Gujarat Co-operative Societies Act and the petitioner is a member of the said Bank. Respondent No. 1 was appointed as a State nominee by the State of Gujarat on the Board of second respondent-Bank on September 26, 1973. The first respondent herein had taken a loan from Baroda People's Cooperative Bank on September 22, 1970. The Baroda People's Co-operative Bank is a Co-operative society carrying its activities within the area of operation of the second respondent-Bank. The loan in question was repayable on September 15, 1972. But as it was not repaid upto the date of nomination of the first respondent by the State Government on the Board of the second respondent-Bank, the petitioner herein filed a Lavadi case being Case No. 1335 of 1973 before the Board of Nominees of the Registrar, Co-operative Societies, Baroda, for a declaration that the first respondent who was nominated by the Government of Gujarat was not entitled to act as a director and for a permanent injunction restraining him from acting as such. The Board of Nominees dismissed the suit by its order of January 3, 1974. The petitioner being aggrieved by the judgment and award of the Board of Nominees took the matter in appeal before the Co-operative Tribunal of the State of Gujarat at Ahmedabad by his appeal No. 3 of 1974. The Tribunal by its order of April 10, 1974 dismissed the appeal and confirmed the judgment and award of the Board of Nominees. The petitioner, therefore, has come to this Court for appropriate writ, order or direction to quash and set aside the order of the Board of Nominees as confirmed in appeal by the Cooperative Tribunal and for a declaration that the second respondent herein was not entitled to act as a director and, therefore, he should be permanently restrained from acting as such.

3. The answer to the question raised in this petition depends on what should be the meaning ascribed to the term, 'liabilities' of the director nominated by the State Government on the Board of Directors of a Co-operative society.' In Chapter VII of the Gujarat Co-operative Societies Act, 1961 under Section 73, the final authority of every society is vested in the general Board of the members in the general meeting. Under Section 74, the management of every society vests in a Committee constituted in accordance with the Act, the Rules and bye-laws, which is to exercise such powers and perform such duties as may be conferred or imposed on it respectively by the Act, the Rules and Bye-laws. Section 80 which empowers the Government to appoint nominee on the Board of Directors and which is relevant for purposes of this petition, reads as under:

80. Where the State Government has subscribed to the share capital of a society, directly or through another society, or has guaranteed the repayment of the principal and payment of interest on, debentures issued or loans raised by a society, the State Government shall have the right to nominate not more than three representatives on the committee of such society, in such manner as may be determined by the State Government from time to time. The members so nominated shall hold office during the pleasure of the State Government or for such period as may be specified in the order by which they are appointed, and any such member on assuming office shall have all rights, duties, responsibilities and liabilities as if he were a member of the committee duly elected.

The second respondent-Bank has framed the Bye-laws and the authorised copy of the said Bye-laws has been produced at the time of hearing of this petition with the consent of both the parties. These Bye-laws form part of the record of the trial Court. Bye-law No. 32(1) relates to the constitution of the Board. The Board is to consist of 17 directors to be elected by the different constituencies, such as Rural Credit and Multipurpose Co-operative Societies, Non-agriculture Credit Co-operative Societies, Marketing and Processing Societies; Consumers, Housing and Lift Irrigation Societies and the individual members of the society and one director to be appointed by the Registrar and the Managing Director being the ex-officio member thereon. The State Government is also empowered to appoint one of its representatives as director on the said Board. Each of such representatives of the State Government as well as of the State Co-operative Bank has one vote. However, the State nominee has a right to make appeal to the State Government and the decision of the State Government on the question will be final. Clauses (2), (3), (4), (5) and (6) of Bye-law No. 32 are not relevant for the purposes of this petition. Clause (7) of Bye-law No. 32 proceeds for the vacation of the office of the director in certain contingencies. The English translation of the said Clause reads as under:

Any member who is unauthorised defaulter of the Bank or of any society working in the area of operation of the Bank or any member from whom the debt is recovered by coercive measures would not be entitled to continue as a director of the Bank.

Sub-clause (e) of Clause (9) of Bye-law No. 32 so far as relevant for the purposes of this petition proceeds for the vacation of the office of the director by any individual member in the contingency prescribed therein. The English translation of Sub-clause (e) of Clause (9) so far as relevant reads as under:

(e) The individual member will not be entitled to be a director of the Bank if he is indebted unauthorisedly to the Bank or to the society working in its area of operation or if the debt is recovered from him by coercive measures.

The question, which has been canvassed by the petitioner in the petition is that the respondent No. 1 being admittedly an unauthorised defaulter of Baroda People's Co-operative Bank-a Co-operative society-working within the area of operation of respondent No. 2 Bank, on and from September 15, 1972, is not entitled to act as a director on the Board of Directors of respondent No. 2 Bank as being Nominee-Director on the Board of Directors of the State Government, by fiction contained in Section 80 of the Act, in as much as, on assuming office he acquires all rights, and is subject to all the duties, responsibilities and liabilities as if he were a member of the Committee duly elected. It has been contended on behalf of the petitioner by the learned Advocate Mr. A. H. Mehta that if a person nominated by the State Government as a Director on the board of the Bank is an unauthorised defaulter, he incurs civil liability of vacating the office in view of the provision contained in Clause (7) of Bye-law No. 32. This contention is sought to be repelled by Mr. Shah, the learned advocate, appearing on behalf of the first respondent, that the fiction contained in Section 80 read with Clause (7) of Bye-law No. 32 cannot be so enlarged as to cover within its scope the nominees appointed by the State Government, as the capacity of such a person is different, in as much as he does not act while acting as a director as a representative of members of the Bank or of the members of any co-operative society working within the area of operation of the Bank. Mr. Shah has raids a very streouou? effort to point out to me the various Clauses contained in Bye-law No. 32 for purposes of impressing upon me that it is not contemplated by the framers of this Bye-law nor by the Legislature in enacting Section 80 of the Gujarat Co-operative Societies Act, 1961, to include the State nominees who are to act as directors on the Board of Directors of Co-operative Societies to suffer the same consequences as if they are representatives of the ordinary members of the Bank or the society.

4. I have not been able to appreciate the contention of Mr. Shah. He has conveniently tried to overlook what is clearly contained in Section 80. It is no doubt true that a person nominated by the State Government would hold office during the pleasure of the State Government or for such period as may be specified in the order by which he is so appointed. In my opinion, as rightly contended by Mr. Mehta, the learned advocate for the petitioner, that any such State nominee on assumption of the office shall enjoy all rights, discharge the same duties, undertake the same responsibilities and be subjected to the same liabilities, as if he were a member of the Committee duly elected. Mr. Shah has overlooked the legislative intent which has been clearly brought out in the last portion of Section 80 of the Gujarat Co-operative Societies Act. The nominee of the State Government would be subjected to the same liabilities as if he were a member of the Committee duly elected. The term, 'liability has the widest amplitude and there is no warrant either under the Scheme of the Act in general or the scheme of Section 80 in particular to uphold the contention of Mr. Shah that the liability which has been envisaged by the Legislature in Section 80 is either monetary liability or criminal liability for that matter alone. The term, 'liability' includes civil as well as criminal liability and it would be the same whether the director on the Board of a Co-operative society is a representative elected by the individual members or by the affiliated societies or is nominated by the State Government, or the Registrar of Co-operative Societies. The fact remains that irrespective of his initial appointment, whether it is by election or by nomination, the moment he assumes the charge of his office as a director, he would as person holding office enjoy same rights, discharge same duties, undertake same responsibilities and are subjected to the same liabilities. The view of the Co-operative Tribunal and the Board of Nominees that because the State has appointed a particular director as its nominee, he would not be subjected to the same liabilities as any other member on the Board, is in my opinion entirely misconceived. If the word, 'liability' has the widest amplitude and includes civil as well as criminal liabilities, it cannot be gainsaid that the obligation to vacate the office in certain contingencies is a sort of a liability which is included in the civil liability prescribed under the Act and/or the Rules and Bye-laws framed thereunder. Mr. Shah made very strenuous effort to persuade me that the Legislature in this case was very much aware of the distinction between the expressions, 'disability,' 'dis-qualification' and the 'Liability' 'as used in different parts of the Act or in the Bye-laws or the Rules framed under the Act. In submission of Mr. Shah, the liability envisaged under Section 80 could not be tantamount to disability or disqualification which a person may incur on account of certain contingencies prescribed under the Act or the Rules and the Bye-laws. I am not inclined to accept this submission of Mr. Shah otherwise the interpretation which he has canvassed would lead to certain results which would not be comprehensive. If the interpretation which has been canvassed by Mr. Shah is accepted, the person nominated by the State Government as its representative on the Board of Directors of a Co-operative society or a Bank would be entitled to continue and act as director even though he might have been convicted for an offence involving moral turpitude, or even if he is of unsound mind, or even if he might not have attended three consecutive meetings of the Board of Directors. In view of the provision contained in Clause (7) of Bye-Law No. 32, if a member is an unauthorised defaulter of a Bank or of any society working in its area of operation or from whom the debt has been recovered by coercive measures, he would not be entitled to continue as a director. Mr. Shah wanted to make a distinction as far as this Clause (7) is concerned. The point of distinction which he has tried to make out is that the woid, 'member' used in Clause (7) should be construed as defined in Section 3 of the Gujarat Co-operative Societies Act, 1962. In submission of Mr. Shah, the State nominee is not necessarily a member of the Bank or of the Society, and even if he is a member, his capacity is altogether a different and when he acts as a director on the Board of Directors, he acts as a State nominee, while the default which he has committed would be in the capacity of a member of a Bank or a society. In other words, Mr. Shah contended that if a State nominee is a defaulter in his capacity as a member of a Bank or a society, his office cannot be vacated under Clause (7) of Bye-law No. 32. Mr. Shah in support of his contention relied on the two decisions of the Supreme Court. The first decision on which Mr. Shah sought to place reliance is in Deccan Merchants Co-operative Bank Ltd. v. Dalichand Jugraj Jain and Ors. : [1969]1SCR887 . The Court was concerned with the meaning of phrase, 'dispute between a society and a member or person claiming through a member'. The Court held that such a dispute should arise through a transaction entered into by a member with the society as a member.

5. The next decision on which Mr. Shah relied is in I.R. Hingorani v. Pravinchandra Kanlilal Shah and Ors. AIR 1972 SC 2191. In this matter before the Supreme Court the facts were that respondent No. 1 was the owner of a flat in a building by name 'Shalimar' situate at Marine Drive, Bombay, entered into an agreement of leave and licence with the appellant under which he was permitted to occupy that flat at a monthly compensation of Rupees 250/-. The appellant occupied the flat in pursuance of that agreement on May 5, 1959. Subsequently in 1962, a Cooperative society by name 'New Shalimer Co-operative Society Ltd.' was formed. Respondent No. 1 became a member of that society on January 26, 1962. In March, 1963 the appellant filed an application under Section 11 of the Bombay Rent Act before the Small Causes Court, Bombay for fixing the standard rent for the flat occupied by him. In the statement of objections filed by the respondent-owner he contended, inter alia, that the civil court had no jurisdiction to go into the dispute between the appellant and the respondent. The respondent owner also moved the Registrar of Co-operative Societies for referring the dispute between him and the appellant to the arbitration. The Registrar entertained that application and appointed one of his subordinates as a nominee who summoned the appellant to appear before him. The appellant raised the question of jurisdiction before the nominee who overruled that objection with the result that the appellant took the matter in appeal before the Assistant Registrar, who also dismissed the appeal. The appellant, therefore, went before the High Court of Maharashtra under Article 226 of the Constitution. As his petition was rejected, the appellant went before the Supreme Court. The Court held following the decision in Deccan Merchants Co-operative Bank Ltd. v. Dalichand Jugraj Jain and Ors. (supra) that when the respondent-owner entered into agreement with the appellant, he was not acting as a member of the Society but as the owner of the flat and, therefore, the case would not fall within Section 91(1)(b) of the Maharashtra Co-operative Societies Act.

6. I cannot appreciate how these two decisions of the Supreme Court can assist the case of respondent No. 1 herein. The contention raised by Mr. Shah about the capacity would have some justification in absence of the provisions contained in Section 80 of the Gujarat Co-operative Societies Act, 1961. In view of the clear provision contained in the said Section I do not think that the question of capacity has any relevance on the dispute raised in this petition. If the State nominee under Section 80 of the aforesaid Act on the Board of Directors of a Co-operative Society or a Bank has same status as that of a duly elected member and as such enjoys the same rights, duties, responsibilities and subjected to the same liabilities, it would not be open to respondent No. 1 herein to contend successfully that he would not be under obligation to vacate the office if his case falls within the terms of Clause (7) of Bye-law No. 32.

7. Mr. Shah, therefore, urged that if a person duly and validly nominated by the State is found to be disqualified or suffering from any disability after his appointment, he could be removed as he holds his office at the pleasure of the State. It may be so possible, but in my on, the question is, whether he is entitled to act as a Director, if he is found to be suffering from any disability and whether his office is liable to be vacated. The answer to this question is in view of the unequivocal provision contained in Section 80, as to such a nominee being subjected to the same liabilities as if he is duly elected member on the Board of Directors, I do not think that any other conclusion is possible.

8. The result is that this petition should succeed and the Rule should be made absolute. I, therefore, issue appropriate writs declaring that respondent No. 1 is not entitled to act as a Director or to take part in the proceedings and vote at the meeting of the Board of Directors in pursuance of his appointment by the State Government on the Board of the second respondent-Bank on September 26, 1973 and he is restrained accordingly. In view of the facts of this case, there should be no order as to cost.


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