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Gujarat State Co-operative Marketing Federation and anr. Vs. R.H. Bhatt, Board of Nominees (Co-op. Societies) and ors. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtGujarat High Court
Decided On
Judge
Reported in(1984)2GLR1203
AppellantGujarat State Co-operative Marketing Federation and anr.
RespondentR.H. Bhatt, Board of Nominees (Co-op. Societies) and ors.
Excerpt:
.....shall, subject to the rules, decide the dispute himself, or refer it for disposal to nominee, or a board of nominees appointed by the registrar: the language is wide enough to include all the persons who are and/or were connected with the society at any stage, at any time, so much so that even if a person who has previously inspected the society or an independent person like auditor who has audited the accounts has been debarred from being appointed as a nominee of the board of nominees to settle the dispute. it is an established principle of law as well as principles of natural justice that no man can be a judge in his own cause. just like caesar's wife, it should be above suspicion. naik has contended that even if the appointment of the nominee is found to be bad, the orders passed by..........filed an arbitration suit no. 876 of 1982 on 7-4-1982 against the petitioner-federation before the board of nominees created under the cooperative societies act, at ahmedabad and obtained an interim order of injunction. it is alleged that the said order of injunction has been passed by the first respondent, mr. r. h. bhatt, as a member of the board of nominees at ahmedabad on 7-4-1982 in which a very wide order of injunction has been issued resulting into great hardship to the petitioner-federation. the petitioner-federation has further alleged that the first respondent was deputy registrar of co-operative societies in the year 1975 and the second respondent was chairman of the petitioner-co-operative society in 1975. it was further stated that the first respondent in his capacity as.....
Judgment:

S.A. Shah, J.

1. An important question of law arises in this petition inasmuch as whether respondent No. 1 who is a member of the Board of Nominees (Cooperative Societies), Ahmedabad has jurisdiction to pass an order of injunction against the petitioner (federal)-Society on the ground that he was an official Director of the petitioner-Society in past.

2. The first petitioner is a federal co-operative society having its area of operation throughout the State of Gujarat and has about 827 cooperative societies as its members and had a subscribed share capital of Rs. 2,99,00,000/- at the relevant time. Petitioner No. 2 is an elected Chairman of the first petitioner-Society. Petitioner No. 2 is a leading public worker espscially having interest in co-operative movement. It appears that respondent No. 2 had filed an arbitration suit No. 876 of 1982 on 7-4-1982 against the Petitioner-Federation before the Board of Nominees created under the Cooperative Societies Act, at Ahmedabad and obtained an interim order of injunction. It is alleged that the said order of injunction has been passed by the first respondent, Mr. R. H. Bhatt, as a member of the Board of Nominees at Ahmedabad on 7-4-1982 in which a very wide order of injunction has been issued resulting into great hardship to the Petitioner-Federation. The petitioner-Federation has further alleged that the first respondent was Deputy Registrar of Co-operative Societies in the year 1975 and the second respondent was Chairman of the petitioner-Co-operative Society in 1975. It was further stated that the first respondent in his capacity as Deputy Registrar of Cooperative Societies had attended the meeting as one of the Directors of the first petitioner-Society on 15th November, 1975 and the said meeting was presided over by the second respondent. The petitioner has also produced copy of the minutes of the meeting of the Board of Directors of the petitioner-Society held on 15-11-1975 showing that the first respondent had attended the said meeting as Director and has put his signature in token thereof. The name of the first respondent appears to be at serial No. 24 at Annexure-K. It is further alleged that the first respondent was thereafter promoted as Joint Registrar of the Co-operative Societies, Gujarat State and he was posted in that capacity at Ahmedabad somewhere in the year 1980. The first respondent has acted as Director of the petitioner-Society in his capacity as Joint Registrar and attended the meeting of the Executive Committee of the first respondent-Society on 11th September, 1980 and the second respondent was also one of the Directors. The proceedings showing the attendance of the first respondent as Member of the Executive Committee, with his signature has been produced at Annexure-K. The name of the first respondent is shown at serial No. 11 in the proceedings of the said meeting. There are other documents also which show that the respondent No. 1 has attended the meetings of the Executive Committee on 19th October, 1980, 25th October, 1980 and 25th November, 1980 and the copies of the minutes with the signatures of the respondents have been produced at Annexures M, N and O to the petition.

3. Mr. M.N. Naik, Joint Registrar (Marketing) Co-operative Societies, Gujarat State has filed an affidavit on 26th April, 1982. In reply to para 8 of the petition, the deponent has stated in para 4 of the affidavit as under:

I say that Section 98 of the Act stipulates inter alia that no person who is connected with a disputes or with the society at any stage shall be appointed as a nominee or as member of the Board of Nominees to settle the dispute. In the instant case the first respondent, in his official capacity, had acted at one time as Director of the Federation, as a representative of the Registrar and merely by virtue of this fact he does not become disqualified to be appoined to act as a Nominee. I further submit that even if the appointment of the Nominee is found to be bad, the orders passed by him are not nullity and void ab initio and the orders would have their intended effects.

On perusal of para 4 of the affidavit it is apparent that the deponent has not denied the averment on facts that respondent No. 1 was Director of the petitioner-Society and has attended the meetings of the Board of Directors as alleged by the petitioners in para 8 of the petition. The only defence of the deponent is that because respondent No. 2 has attended the said meeting in official capacity, i.e. as representative of the Registrar, the provisions of Section 58 (proviso) not attracted and even if the same is found to be attracted the order passed by the respondent No. 1 would not be a nullity and will have its intended effects.

4. The petitioners have also raised several contentions regarding the merits of the orders passed by respondent No. 1. If the orders passed by respondent No. 1 is found to be without jurisdiction, then the question whether the said order is proper and legal does not arise. The parties have agreed that if I come to the conclusion that the order passed by respondent No. 1 is without jurisdiction it would not be necessary to enter into the merits of the other contentions since if some observations are made by the Court they might prejudice one party or the other.

5. Mr. K. G. Vakharia, Learned Counsel for the petitioner has contended that even according to the principles of natural justice a person cannot be a judge of his own cause and, therefore, apart from Section 98 of the Co-operative Societies Act the respondent No. 1 ought not to have entertained and heard the suit.

6. Mr. Vakharia further stated that enacting Section 98 (particularly proviso) the legislature has made positive law that a person who was connected with the dispute in past or connected in past with the society being an interested person should not decide the dispute as a nominee or as a member of the Board of Nominees. Mr. Vakharia further contended that since respondent No. 1 is prohibited from deciding the dispute by the provision of law, his decision is a decision without jurisdiction and, therefore, a nullity and the petitioner has a right to challenge the decision by invoking jurisdiction of this Court under Article 226 of the Constitution of India.

7. Since the whole argument turns on the interpretation of Section 98 it is necessary to reproduce the said provision which reads as under:

98(1) : If the Registrar is satisfied that any matter, referred to him is a dispute, within the meaning of Section 96 the Registrar shall, subject to the rules, decide the dispute himself, or refer it for disposal to nominee, or a board of nominees appointed by the Registrar:

Provided that no person who is connected with a dispute or with the society at any stage or has previously inspected the society or audited its accounts shall be appointed as a nominee or as a member of the Board of Nominees to settle the dispute.

8. Mr. Vakharia relies upon the proviso and particularly the words 'no person who is connected with a dispute or with the society at any stage'...'shall be appointed as a nominee or as member of the Board of Nominees to settle the dispute.'

9. It may be noted that the proviso is in negative term and issues a mandate that no person who is connected with the society in the manner set in the proviso shall be appointed as a nominee to settle the dispute. Now, let us consider the scheme of the Act. The Gujarat Cooperative Societies Act, 1961 (Gujarat Act No. 10 of 1962) hereinafter referred to as the Act, Section 96 creates a special forum for adjudicating the disputes touching the constitution, management or business of a cooperative society if the party thereto were falling within the provisions of Sub-section (1)(a) to (e). Complete machinery has been set down for the adjudication of the dispute by the Registrar or his nominees and thereafter an appeal to the Gujarat State Co-operative Tribunal under Section 102 or to the higher authorities as provided in Section 153. There are also provisions for review and revision. The decision given in appeal or revision, as the case may be, by the respective authority, has been made final and conclusive, cannot be called in question in any civil or revenue court both under provisions of Sections 150(11) and 153(6) of the Act. Section 166 provides that:

(i) Save as expressly provided in this Act, no Civil or Revenue Court shall have any jurisdiction in respect of:

(a) the registration of a society or its by-laws the amendment of the by-laws, or the dissolution of the committee of a society; or the management of the society on dissolution thereof; or

(b) by dispute required to be referred to the Registrar, or his nominee or Board of Nominees, for decision.

In this way, the disputes which are covered by provisions of Section 96 are exclusively triable by the Registrar and/or his nominees or Board of Nominees and has been declared to be final and conclusive by respective provisions, and jurisdiction of Civil Court is expressly ousted under Clause (b).

10. In the light of the above scheme I shall examine the provisions of Section 98 and its proviso.

11. Mr. R. M. Vin, Learned Counsel for respondents No. 1 and 3 and Mr. H. M. Mehta, Learned Counsel appearing on behalf of respondent No. 2 have contended that under the provisions of by-law 39(F) respondent No. 1 placed on the Board of Directors as representative of the Registrar of Co-operative Societies, and as such respondent No. 1 has attended the meeting of the Board of Directors in his official capacity. Therefore, he does not disqualify to be appointed to act as Nominee. The aforesaid argument of Mr. Vin and Mr. Mehta cannot be accepted. The language of Section 98(1) proviso is clear and is not capable of any other interpretation. According to the said proviso the following persons are disqualified for being appointed as Nominee or a Member of the Board of Nominees to settle the dispute, namely, (1) a person who is connected with the dispute, (2) a person who is connected with the society at any stage; (3) a person who has previously inspected the society; or (4) a person who has audited the accounts of the society. The language is in negative form and mandatory in nature, that if any person who comes in any of the aforesaid category is declared to be unfit to act as a Nominee, whether such connection is with a dispute or with the society at any stage. In the instant case, the respondent No. 1 was a Director of the petitioner-Society, no doubt in an official capacity as a representative of the Registrar. But as a Director he has to take part in the proceedings, as to express his opinion and may also vote to a resolution. In other words, Directors are considered to be persons who are in management and interested in the working of the society; whether such Director is appointed by election or by nomination makes no difference. The Board of Directors is the governing body of the society and each Director is deemed to be actively interested in the management and working of the Society and is assumed to have interest in the society. Under the by-laws of the society, all the Directors are enjoined the same powers and have the same right in the management and working of the Society. The proviso has not made any distinction whether such relation with the society is continuing or severed off. The proviso in terms states that no person who is connected with the society at any stage shall be appointed as a nominee or member of the Board of Nominees to settle the disputes. The language is wide enough to include all the persons who are and/or were connected with the society at any stage, at any time, so much so that even if a person who has previously inspected the society or an independent person like auditor who has audited the accounts has been debarred from being appointed as a Nominee of the Board of Nominees to settle the dispute. The Nominee or a Member of the Board of Nominees is an adjudicating authority which decides the rights of the parties and such decision is treated as final and conclusive. It is an established principle of law as well as principles of natural justice that no man can be a judge in his own cause. This is based upon the maxim of 'Nemo debet esse judex in propria causa' - the deciding authority must be impartial and without bias. It is also an established principle of law that justice should not only be done but manifestly and undoubtedly be seem to be done. Just like Caesar's wife, it should be above suspicion. The petitioner's case is still stronger in the sense that a positive provision of law has been made by the legislature debarring such persons from adjudicating the dispute. Therefore, in my opinion the arbitration suit filed by respondent No. 2 against the petitioner-Society cannot be heard by respondent No. 1 who was at one time Director of the petitioner-Society, though in an official capacity. Though the respondent No. 1 has acted as Director in the official capacity, in my opinion, it does not make any difference. Provision is made by the legislature to exclude a person to act as a Nominee who was directly or indirectly associated with the dispute or the society at any stage in the past. In my opinion, the association of respondent No. 1 as a Director of the Society representing in an official capacity will not take his case out of the purview of the proviso. Therefore, respondent No. 1 cannot be appointed nor can he act, as a Nominee of the Registrar.

12. The next contention of Mr. Vakharia that if respondent No. 1 cannot be appointed as a Nominee, the transfer of the suit of the petitioner to him for adjudication was invalid and any decision that might have been taken by such a nominee would be a decision without jurisdiction, ultra vires, invalid and is not a decision in the eyes of law and should be quashed and set aside.

13. In para 4 of the affidavit-in-reply Mr. Naik has contended that even if the appointment of the Nominee is found to be bad, the orders passed by him are not nullity and void ab initio and the orders would have their intended effects. I am not able to appreciate the contention of the deponent. If the appointment of nominee is prohibited by the mandate of law and if he has no jurisdiction to hear the dispute, the orders passed by him in the capacity of nominee are ultra vires and ab initio void. He has neither the power nor the jurisdiction to act as a Nominee and to hear the dispute. The orders having been passed without jurisdiction have no legal effect and are liable to be quashed and set aside Mr. H. M. Mehta, Learned Counsel for respondent No. 2 has drawn my attention to certain allegations made against respondent Nos. 2 & 3. Since Mr. Vakharia, Learned Counsel for the petitioner has agreed that if the orders passed by the first respondent are found to be without jurisdiction, then he does not press for other contentions to be decided because any observation made by this Court may prejudice the cause of the parties, in the proceedings before the Nominee. He, therefore, does not press for decision regarding the other contentions raised by him in the petition.

14. Mr. R.M. Vin, Learned Counsel for respondents No. 1 and 3. and Mr. H.M. Mehta, Learned Counsel for respondent No. 2 also agreed that if the appointment of respondent No. 1 is found to be invalid on the interpretation of the proviso to Sub-section 1 to Section 98, then suitable orders may be passed so that a nominee having jurisdiction can decide the disputes which are pending since long. They further submitted that it may be made clear that the petition has been allowed only on an interpretation of the said provision and not that there was any factual bias by respondent No. 1 in passing the order. Therefore, I am making it clear that the decision of respondent No. 1 has been set aside only on the interpretation of proviso to Sub-section (1) of Section 98. I have not examined the merits of any other averments of the petitioner and the orders of respondent No. 1 are being set aside only on the interpretation of proviso to Sub-section (1) of Section 98 without any reference to the merits of any other contentions.

15. The Nominee or the Board of Nominees who shall hear this matter shall decide each and every contention of the petitioners and the respondent on its own merits. In view of the pending litigation which requires immediate decision, the concerned authority will take immediate steps to transfer the matter to another nominee who has jurisdiction to hear the dispute in accordance with law, within one month from the date of receipt of the writ of this Court.

16. In the result, the petition succeeds. The impugned order of respondent No. 1 dated 7th April, 1982 at Annexure-H is quashed and set aside. It is further ordered that respondent No. 1 will not hear the arbitration case No. LVD/876/82/290/82. Rule is made absolute to that extent with no order as to costs. Writ to be issued forthwith.


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