Skip to content


Aljibhai Narsinhbhai Solanki Vs. Chhaganbhai K. Patel and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtGujarat High Court
Decided On
Judge
Reported in(1965)6GLR947
AppellantAljibhai Narsinhbhai Solanki
RespondentChhaganbhai K. Patel and ors.
Excerpt:
.....against delinquent promoters and officers of the society. when the application is made to the registrar the registrar may and ordinarily would as a matter of course entertain the application and issue notice to the respondents and then proceed to examine into the conduct of the respondents and after giving reasonable opportunity to the respondents to submit their explanation make an order either dismissing the application if it is not well-founded or requiring the respondents or such of them as may be held liable to repay or restore to the society such part of the money or property of the society as they may be found to have misapplied or retained or become liable accountable for or to contribute such sum to the assets of the society by way of compensation in regard to the..........may provide therein for the payment of the costs or any part thereof of such examination by such person or persons as he thinks just and he may direct that such costs or any part thereof shall be paid in the first instance from the funds of the society or from the interest on surplus assets of the society dissolved under section 49 as the case may be and then recovered and repaid to the society or credited to the said surplus assets.(2) this section shall apply notwithstanding that tale act is one for which the offende may be criminal responsible.5. sub-section (1) provides that where in the course of or as a result of an audit under section 22 or an inquiry under section 43 or an inspection under section 44 or the winding up of a society it appears that any person who has taken part.....
Judgment:

P.N. Bhagwati, J.

1. There are several points raised in this petition but it: possible to dispose of the petition on a short ground and we will, therefore, state only so much of the facts as are necessary in order to appreciate that ground. The petitioner was at all material times the Honorary Secretary and the fourth respondent was the Chairman of the Sidhapur Taluka Vankar Audyogik Society Ltd., a Society registered under the Bombay Co-operative Societies Act, 1925. It appears that the cash of the Society used to remain with the fourth respondent and out of that cash a sum of Rs. 4.000/- was retained by the fourth respondent and wsi not returned by him to the Society. An inquiry into the constitution, working and financial condition of the Society was ordered by the Assistant Registrar of Co-operative Societies on 28th July 1953 and the Inquiry Officer also reported that the fourth respondent was guilty of illegal retention of Rs. 4 0 and that this amount should be recovered from him with interest from 1st December 1952. The Assistant Registrar of Co-operative Societies thereupon made an order directing that legal steps should be taken against the fourth respondent for recovery of the sum of Rs. 4 0 together with interest. In the meantime however the Society passed a resolution that the petitioner was liable for the sum of Rs. 4 30 and that he should be directed to pay up that amount to the Society and if the petitioner failed to do so arbitration proceedings should be commenced against him for recovery of that amount. According to the petitioner this resolution was passed by the Society at the instance of the fourth respondent who was in a position to dominate the members of the Society. The Assistant Registrar however objected to the commencement of arbitration proceedings against the petitioner since the claim of the Society underlying the proposed arbitration proceedings was directly contrary to the finding of the Inquiry Officer. The Society therefore passed another resolution for commencement of arbitration proceedings not only against the petitioner but also against the fourth respondent and the dispute was referred for arbitration to the Registrar under Section 54 of the Act. The Assistant Registrar referred the dispute to Shri R.H. Malek as his nominee but Shri R.H. Malek failed to decide the dispute and the dispute was therefore withdrawn from him and was referred to another nominee namely Shri R.Y. Deshpande. Shri R.Y. Deshpande also failed to decide the dispute even though time for doing so was extended upto 5th September 1958 and he returned the papers to the Assistant Registrar on 30th June 1958 on the plea that the case was of a complicated nature and should better be tried by a Civil Court. Nothing further transpired thereafter until 2nd March 1959 when an order was passed by the Registrar directing winding up of the Society and appointing Shri I.B. Naik as Liquidator of the Society. The Liquidator made an application to the Deputy Registrar for Industrial Co-operatives Ahmedabad for an order that the arbitration should be withdrawn and that the case should be examined under Section 50A of the Act. On the application the Assistant Director for Industrial Co-operatives made an order dated 29th June 1959 withdrawing the arbitration case entrusted to Shri R.Y. Deshpande. The Liquidator thereafter made another application to the Deputy Registrar for Industrial Co-operatives on 1st July 1959 under Section 50A of the Act to examine the conduct of the fourth respondent and to make an order requiring him to pay to the Society the sum of Rs. 4 0 together with interest thereon at the rate of four per cent per annum from 1st December 1952. The Deputy Registrar for Industrial Co-operatives thereupon made an order dated 6th August 1959 under Sub-section (1A) of Section 50A authorizing Shri H.V. Shah a Retired Deputy Collector to examine the conduct of the fourth respondent. The fourth respondent feeling aggrieved by this order preferred an appeal against the same to the Registrar of Co-operative Societies under Section 64 of the Act. The Registrar of Co-operative Societies entertained the appeal and passed an order in the appeal on 30th August 1960 setting aside the order dated 6th August 1959 passed by the Deputy Registrar for Industrial Cooperatives and directing that the arbitration proceedings filed by the Society against the petitioner and the fourth respondent which had been withdrawn from the Registrars nominees Sarvashri R.H. Malek and R.Y. Deshpande and were kept in abeyance by the Assistant Registrar for Industrial Co-operatives should be revived. Since this order affected the petitioner by directing revival of the arbitration proceedings the petitioner preferred the present petition challenging the order on various grounds and praying for a writ of certiorari to quash and set aside the order.

2. Two contentions in the main were advanced by Mr. R.K. Patel learned advocate appearing on behalf of the petitioner in support of the petition. One was that no appeal lay against the order dated 6th August 1959 passed by the Deputy Registrar for Industrial Co-operatives and that the impugned order passed by the Registrar of Co-operative Societies was therefore without jurisdiction and the other was that the petitioner not being a party to the appeal it was not competent to the Registrar of Co-operative Societies to direct revival of the arbitration proceedings against the petitioner. On the second contention the answer given on behalf of the respondents was that though it was no doubt true that the petitioner was not made a party to the appeal it was not correct to say that the order was passed by the Registrar of Co-operative Societies without complying with the principles of natural justice since the petitioner was heard in the appeal before the order was passed by the Registrar of Co-operative Societies. This raised a dispute whether the petitioner was given a fair opportunity to show cause against the proposed order directing revival of the arbitration proceedings and the order could be said to be passed in compliance with the principles of natural justice but it is not necessary for us to enter upon a consideration of that dispute since we are of the view that the first contention urged on behalf of the petitioner is wellfounded and he must succeed on that contention.

3. The first contention raises a question of construction of Sections 50A and 64 of the Act. The question is whether an appeal lies to the Registrar of Co-operative Societies against an order made by the Deputy Registrar for Industrial Co-operatives under Sub-section (1A) of Section 50A authorizing a person to examine the conduct of any of the persons specified in Sub-section (1) of Section 50A. The right of appeal is provided by Section 64 which is in the following terms:

64 (1) An appeal against an order or decision under Sections 10 16 45 47 50 or 50 shall lie

(a) if made or sanctioned by the Registrar or Joint Registrar on whom the powers of the Registrar are conferred to the State Government in the city of Bombay and to the Commissioner elsewhere in case of an order made under Section 50A and in any other case to the State Government;

(b) if made or sanctioned by any person other than the Joint Registrar on whom the powers of the Registrar are conferred to the Registrar: Provided that no appeal shall lie against an order passed by the Registrar on appeal.

(2) An appeal under Sub-section (1) shall be filed within two months of the date of the communication of the order or decision.

It is clear from the language used in Section 64 that an appeal would lie against the order of the Deputy Registrar for Industrial Co-operative under Sub-section (1A) of Section 50A if such an order can be said to be an order or decision under Section 50A within the meaning of Section 64. The first question which we must therefore ask ourselves is: what is the true connotation of the words order or decision occuring in Section 64? Do these words refer to any order or decision which may be given under the sections specified in Section 64 or are they limited to an order or decision which affects the rights or liabilities of the parties? Now in the context and the juxtaposition in which these words have been used there is no doubt that the Legislature clearly intended that that order or decision under the sections specified in Section 64 should be subject to appeal which is not processual in character but which affects the rights and liabilities of parties. If we look at the sections referred to in Section 64 we find that the order or decision under each of those sections is an order or decision which determines some right or liability of parties. Section 10 contemplates an order by the Registrar registering a Society and its by-laws. The question of registration of the Society and its by-laws is certainly a question which affects some right or liability and cannot be said to be 3 processual order or decision. So also an order by the Registrar under Section 10 registering amendment of the bylaws of a Society is an order which affects rights or liabilities of parties since the amendment can have no effect unless it is registered by the Registrar. Section 45 provides for making of an order for costs in respect of an inquiry held under Section 43 or an inspection made under Section 44 and it says that the Registrar may apportion the costs or such part of the costs as he may think right between the Society the members or creditors demanding the inquiry or inspection the officers or former officers and the members or past members of the Society and may also provide that the costs or any part thereof shall be paid in the first instance from the funds of the Society and then recovered and repaid to the Society. It is elementary that an order for costs would always affect rights or liabilities of parties. The order under Section 47 is an order for winding up the Society and if that is not an order which affects rights and liabilities of parties it is difficult to see what other order can Section 50 deals with the powers of a Liquidator in winding up a Society and empowers the Liquidator to do various things with the consent of the Registrar. A decision taken by the Liquidator in respect of the matters specified in Section 50 may affect rights or liabilities of parties and such a decision is made appealable under Section 64. It is therefore clear having regard to the context in which the words order and decision occur and the juxtaposition of those words that what is made appealable by the Legislature under Section 64 is not any order or decision but an order or decision which affects rights or liabilities of parties. If there is any order or decision which is processual in character and which does not affect rights and liabilities of parties it would not be appealable under Section 64.

4. Having examined the scope and ambit of Section 64 we will now turn to Section 50A. That section is similar to Section 235 of the Indian Companies Act 1913 and Section 543 of the Companies Act 1956 and like those sections provides for misfeasance proceedings to be taken against delinquent promoters and officers of the Society. In order to appreciate the contentions which have been urged before us in regard to the construction of that section it is necessary to reproduce it in extenso. It runs as follows:

50A. (1) Where in the course of or as a result of an audit under Section 22 or an inquiry under Section 43 or an inspection under Section 44 or the winding up of a Society it appears that any person who has taken part in the organization or management of the Society or any past or present chairman secretary member of the managing committee or officer of the Society has misapplied or retained or become liable or accountable for any money or property of the Society or has been guilty of misfeasance or breach of trust in relation to the Society the Registrar may on the application of the officer conducting the audit or holding the inquiry or inspection, of or the liquidator or of any creditor or contributory examine into the conduct of such person and after giving reasonable opportunity to the person concerned to submit his explanation make an order requiring him to repay or restore the money or property or any part thereof respectively with interest at such rate as the Registrar thinks just or to contribute such sum to the assets of the society by way of compensation in regard to the misapplication retainer misfeasance or breach of trust as the Registrar thinks just.

(1A) The Registrar instead of himself examining into the conduct of any such person under Sub-section (1) may by an order in writing authorize any person to examine into the conduct of such person under Sub-section (1). The person so authorized shall after giving such person reasonable opportunity to submit his explanation report to the Registrar the result of the examination with his recommendations as to what action if any the Registrar should take. The Registrar after considering the report make any order which he considers just in the circumstance and which he could have made under Sub-section (1) if he had made the examination himself.

(1B) For the purpose of Sub-section (1A) the person authorized shall subject to the general or special order of the State Government be a person who is or has held office not lower in rank than that of a Deputy Registrar Co-operative Societies a Deputy Collector or a Civil Judge (Senior Division).

(1C) The Registrar, in making any order, under this section, may provide therein for the payment of the costs or any part thereof of such examination by such person or persons as he thinks just and he may direct that such costs or any part thereof shall be paid in the first instance from the funds of the Society or from the interest on surplus assets of the Society dissolved under Section 49 as the case may be and then recovered and repaid to the Society or credited to the said surplus assets.

(2) This section shall apply notwithstanding that tale act is one for which the offende may be criminal responsible.

5. Sub-section (1) provides that where in the course of or as a result of an audit under Section 22 or an inquiry under Section 43 or an inspection under Section 44 or the winding up of a Society it appears that any person who has taken part in the organization or management of the Society or any past or present chairman secretary member of the managing committee or officer of the Society has misapplied or retailed or become liable or accountable for any money or property of the Society or has been guilty of misfeasance or breach of trust in relation to the Society the officer conducting the audit or holding the inquiry or inspection or the may or any creditor or contributory may apply to the Registrar to examine into the conduct of such person and to make an order requiring him to repay or restore the money or property or any part thereof or to contribute a certain amount to the assets of the Society by way of compensation in regard to the misapplication retainer misfeasance or breach of trust. When the application is made to the Registrar the Registrar may and ordinarily would as a matter of course entertain the application and issue notice to the respondents and then proceed to examine into the conduct of the respondents and after giving reasonable opportunity to the respondents to submit their explanation make an order either dismissing the application if it is not well-founded or requiring the respondents or such of them as may be held liable to repay or restore to the Society such part of the money or property of the Society as they may be found to have misapplied or retained or become liable accountable for or to contribute such sum to the assets of the Society by way of compensation in regard to the misapplication retainer misfeasance or breach of trust as the Registrar thinks just. When such an order is made by the Registrar disposing of the application it would certainly be an order under Section 50A and would be appealable under Section 64. But the question is whether the act of the Registrar in entertaining the application and directing issue of notice to the respondents can be said to be an order or decision within the meaning of Section 64. Before we examine this question it may be pointed out that the Registrar himself need not examine into the conduct of the respondent but he may under Sub-section (1A) by an order in writing authorize any person to examine into the conduct of the respondents under Sub-section (1) and the person so authorized would after giving the respondents reasonable opportunity to submit their explanation report to the Registrar the result of the examination with his recommendations as to what action if any the Registrar should take and the Registrar may then after considering the report make any order which he considers just in the circumstances and which he could have made under Sub-section (1) if he had made the examination himself. Of course by reason of Sub-section (1B) the person who can be authorized to make the examination under Sub-section (1A) must be a person who is or has held office not lower in rank than that of a Deputy Registrar of Co-operative Societies a Deputy Collector or a Civil Judge Senior Division. But in a case where such person is authorized by the Registrar the examination would be made by such person and after considering the report of the examination made by such person the Registrar would make the final order under Sub-section (1) disposing of the application. This order also being a final order under Section 50A disposing of the application would be appealable under Section 64: but would the order passed by the Registrar authorizing such person to examine into the conduct of the respondents be subject to appeal under Section 64? There is no doubt that if such an order made by the Registrar under Sub-section (1A) is appealable under Section 64 the act of the Registrar in issuing notices to the respondents where he proposes to make the examination himself must also be appealable under Section 64 for there is no distinction in principle between the Registrar himself issuing the notices for making the examination himself and the Registrar making an order authorizing any other person to make the examination. Though what the Registrar does in the latter case is described as the making of an order it is nothing but delegation of the power to examine into the conduct of the respondents. The Registrar in such a case instead 4 himself examining into the conduct of the respondents authorizes any other person to examine into the conduct and if there is no appeal against the act of the Registrar in issuing notices for the purpose of holding the examination himself there can be no appeal against the order of the Registrar authorizing such person to hold the examination and vice versa. Now it is undoubtedly true that when the Registrar acts upon the application and issues notices to the respondents the Registrar does decide in the loose sense of the term to entertain the application and to issue the notices but that is not the decision contemplated by Section 64. The act of the Registrar does not decide the rights or liabilities of the parties. The Registrar merely issues notices to the respondents and the respondents can appear before him and make their submissions in regard to the application. If the application does not disclose any cause of action or if the Registrar has no jurisdiction to entertain the application the respondents can ask the Registrar to dismiss the application but we do not see how the mere act of the Registrar in entertaining the application and issuing notices to the respondents for proceeding with the application can be said to be a decision or order which affects rights or liabilities of parties The rights or liabilities still remain to be determined and it is for the deterinination of the rights and liabilities that the Registrar issues notices to the respondents. The act of the Registrar is thus of a processual nature and cannot form the subject matter of appeal under Section 64. Equally an order made by the Registrar under Sub-section (1A) cannot form the subject matter of appeal since that is also of a processual nature and does not affect the rights or liabilities of parties. We are therefore of the view that no appeal lay against the order of the Deputy Registrar for Industrial Cooperatives dated 6lh August 1959 and the impugned order passed by the, Joint Registrar of Co-operative Societies was accordingly without jurisdiction.

6. We therefore allow the petition make the Rule absolute and direct that a 6 writ be issued-qHashing and setting aside the order dated 30 August 1960 made by the Joint Registrar of Co-operatiye Societies. The respondents will pay the costs of the petition to the petitioner.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //