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Judgment
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Sabyasachi Bhattacharyya, J.
The opposite party, a member/Director of the petitioner society, instituted a dispute case, bearing Dispute Cas-e No. 47 of 20022003, for the
following reliefs:
a) Declaring that all actions of the member right from the publication of the notice inviting bids, float of bid documents, the proceedings and resolution
in the adjourned Annual General Meeting of the aforesaid Society held on May 5, 2002 accepting the offer of M/s HiRise Apartment Makers Private
Limited and acceptance of earnest money and security deposit of Rs. 10 lakhs from them and thereafter, were illegal and void; and
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b) Permanently restraining the defendants and their men and agents from proceeding further and taking any steps further on the basis of the said
illegal resolution; and c) Costs of the case.
Such case was filed before the Registrar, Cooperative Societies and was referred to an arbitrator. The said proceeding culminated in a contested
award dated December 21, 2004. The operative portion of the award stood as follows:
“A W A R D
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1) That the society shall restrain itself from taking any step towards demolishing the existing constructions of the Administrative Building of the society
as part of a joint venture with a Private promoter/developer, M/s. Hi Rise Apartment Makers Pvt. Ltd.
2) That special general meeting be called with clear one month’s notice ensuring receipts by all the members discussing the issue in every detail
with transparency at every stage being observed to the full, and any resolution taken thereof in favou-r of the BOD’s proposal of this nature be
sent to the Registrar of Cooperative Societies, West Bengal for his approval as required under Rule 149 (11) of W.B.C.S. Rules, 1987.â€
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The petitioner preferred against the aforesaid award an appeal, bearing no. 7 of 2005, before the West Bengal Cooperative Tribunal, which was
dismissed f-or default on March 24, 2006 in the presence of the present opposite party. The- awardholder/opposite party put the said award into
execution by filing an application under Section 151, read with Order XXI Rule 32 (5) of the Code of Civil Procedure, thereby giving rise to Arbitration
Execution Case No. 19 of 2009 before the Civil Judge (Senior Division), Ninth Court at Alipore, District: South 24Parganas.
The awarddebtor/petitioner contested the same by filing a written objection thereto. The awarddebtor also filed a petition for putting up the execution
petition to decide maintainability of the same. An order of attachment was passed in the execution case.
The Civil Judge (Senior Division), took up all pending applications, including the application challenging maintainability of the execution case and,
vide order dated April 17, 2014, held that the execution case was still maintainable in law since the award was yet to be satisfied at the instance of the
award debtor/Society.
The order of attachment, passed in the meantime, was also vacated.
Being dissatisfied with the said order dated Apri-l 17, 2014, the petitioner Society and its Secretary have preferred the instant application under
Article 227 of the Constitution of India.
Learned Senior Advocate appearing for the petitioners argues that both the components of the arbitral award have been satisfied in the meantime.
The Society cancelled its agreement with M/s HiRise Apartment Makers Private Limited and has entered into a new agreement regarding
construction of the administrative building of the Society. It was further argued that, in any event, a special general meeting had been called in the
meantime on January 15, 2006 in terms of the second component of the award. It is argued that satisfaction of the second component of the award
automatically rendered academic the first component- thereof, since, according to him, nothing remained in the first component after alleged
satisfaction of the second. - -
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Apart from holding a special general meeting, it is submitted, the petitioner / Society also took steps for sending its proposal with regard to the
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proposed Administrative Building to the Registrar of Cooperative Societies. However, it was informed by the Joint Registrar of Cooperative Societies
(Housing), West Bengal to the Secretary of the petitionerSociety that no formal permission was required from the Registrar of Cooperative Societies
under the provisions of the West Bengal Cooperative Societies Act, 2006 and West Bengal Cooperative Societies Rules, 2011 for building the
office cumadministrative building as per the petitioner,s by laws, within the ambit of the relevant provisions of the Kolkata Municipal Corporation
Rules. As such, learned Senior Advocate submits, no permission was required at all as contemplated in the second component of the award.
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In the light of such developments, the petitioners submit that the award ought to have been held to be satisfied and the execution case dropped.
The award holder/opposite party, appearing in person with the leave of Court, submits that the pretended -compliance with the arbitral award by the
petitioners was a mere eye wash.
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Despite the specific direction in the arbitral award, that the petitioner no. 1 Society should restrain itself from taking any steps towards demolishing
the existing constructions of the administrative building of the Society as part of a joint venture with M/s HiRise Apartment Makers Private Limited,
the petitioner no. 1 / Society merely renewed such agreement, upon making cosmetic changes to the original joint venture agreement, and has been
proceeding fullblast with the demolition work in -collaboration with M/s HiRise Apartment Makers Private Limited, contrary to the award.
As to holding a special general meeting, the opposite party submits that notice of such meeting was not served on all the members. Moreover, the
notice did not match the actual resolution proposed and taken in the special general meeting dated January 15, 2006. The opposite party places
reliance on Rule 21(2) of the West Bengal Cooperative Societies Rules, 2011, which stipulates that at a special general meeting, no business other
than that specified in the relevant notice shall be considered. The resolution proposed and passed in the special general meeting dated January 15,
2006, according to the opposite party, did not formulate any proposal as to construction of the administrative building, let alone in detail or with
transparency. It only authorized the board of directors to take further action, such as erection of hoardings etc., for further development/utilization of
the premises in question and did not touch the issue of construction of the administrative building at all.
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It was further submitted that the letter from the Joint Registrar, Cooperative Societies (Housing), intimating that -no formal permission was
required for building the officecumadministrative building of the petitioner no. 1Society, was issued entirely on the basis of the project submitted by
the- Society itself to the Registrar. It was indicated from the said project profil-e, that it gave an impression that no new project or joint venture was
being entered into but the proposed project was a conti-nuation of the previous agreement with M/s HiRise with minor modifications. In the event the
Society had presented the real picture by entering into a new project upon cancellation of the previous one with M/s HiRise, the Registrar would
definitely have insisted on permission / approval to do so. In this context, the opposite party relies on the provisions of Rule 145(2) of the West Bengal
Cooperative Societies Rules, 2011, which stipulate that no primary housing cooperative society shall make any change in the project or the project
site without the approval of the general body with three fourths majority and prior approval of the Registrar.
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According to the opposite party, ne-ither was obtained by the petitioner no-. 1 Society before proceeding with the previous project with cosmetic
modifications.
It was lastly arg-ued by the opposite party that the petitioners were attempting to defeat the very spirit of the cooperative principle, as reflected in
the preamble of the West Bengal Cooperative Societies Act, 2006. The cooperative movement, according to the opposite party, comprises joint
participation of all members and aspires to give a healthy impetus to self help and mutual aid. As such, the endeavour of the petitioners to enter into
development agreements with external, commercial developers would defeat the very purpose of the movement. Such efforts, to gain profit for the
sake of it, is an antithesis to the spirit of the cooperative movement.
The opposite party cited the following judgments in support of the proposition that the supervisory jurisdiction of this Court under Article 227 of the
Constitution of India is very limited:
i) AIR 1984 SC 38 [Mohd. Yunus vs. Mohd. Mustaqim and others]; ii) AIR 2000 SC 3495 [Khimji Vidhu vs. Premier High School]; iii) AIR 2003 SC
3044 [Surya Dev Rai vs. Ram Chander Rai and others]; iv) (2010) 8 SCC 329 [Shalini Shyam Shetty and another vs. Rajendra Shankar Patil].
Upon consideration of the arguments of both sides and the materials on record, it appears that the special general meeting held on January 15,
2006, did not, at all, comply with the second component of the arbitral award dated December 21, 2004. The resolution proposed and passed in such
me-eting was as follows: - -
“ Be it resolved that the Board is hereby empowered to take all necessary steps to construct the market without delay, while keeping in mind of
maximum benefit to the Society and it’s members; total control of the Society over the premises in accordance with Acts, Rules, Bye Laws and
Cooperative Principles. The proposed complex will be of marketcumcommercial nature and the Society will complete the project on its own,
whereby no Promoter will be appointed.
The Board is further directed to take all necessary steps to prepare a comprehensive project report by 31st March, 2006, covering minute details of
each & every parameter of the project like cost of project, cash flow, revenue from the -project, mode of finance etc and circulate a report amongst
the members, which will be considered by the General Body at the Annual General Meeting scheduled to be held in April, 2006. This resolution
supersedes all previous resolutions of the General Body and / or the Board with regard to the development of the market.â€
“Be it resolved that the contract executed by and between the Society and M/s HiRise Apartment Makers Pvt. Ltd., including the work order
issued by the Society are to be treated as revoked and cancelled. The Board of Directors is directed to refund the security deposit to the said
company, after deducting necessary penalties and dues in terms of the said contract.
The house further resolved that in super cessation of all earlier resolutions of the general body as well as Board of Directors in connection with the
Administrative Building, the Board of Directors is hereby authorised to take all further necessary action such as erection of hoardings etc., for further
development/utilization of the said premises for the best interest of the Society and it’s members, except letting out, long term in nature under
tenancy act.â€
Such resolution did not deal with the issue of constructing the administrative building of the Society at all. The Board of Directors were vaguely
authorized to take “all further necessary action such as erection of h-oardings etc. for further development/utilization of the said premises for the
best interest of the Society and its members, except letting out, long term in nature, under the tenancy actâ€. As such, the specific direction in the
award to discuss the issue in every detail with transparency at every stage being observed to the full, was blatantly violated.
This apart, the project which was submitted to the Registrar of Cooperative Societies for approval was, on the face of it, a clear indication of
violation of the arbitr-al award. The impression carried by such project was obviously that the previous joint ventur-e with M/s HiRise would continue
with certain cosmetic modifications, which was entirely against the letter and s-pirit of the award. -
Instead of restraining itself from taking any step towards demolishing the existing construction of the administrative building as part of a joint
venture with M/s HiRise, as directed categorically in the award, the petitioners proceeded merrily with the eyewash exercise of making certain
innocuous modifications to the original joint venture agreement with M/s HiRise and were bold enough to mislead the Registrar of- Cooperative
Societies to indicate that no permission was necessary from that end for such continuation of construction.
In the event a new project was to be entered into in terms of the arbitral award, Rule 145(2) of the -2011 Rules, corresponding to Rule 149(11) of
the 1987 Rules, would definitely mandate an approval from the Registrar. As such, the exercise carried out by the petitioners to pay lipservice to the
terms of the award and entirely misleading the Registrar was, in fact, deplorable.
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21.- In this context, the opposite party rightly pointed out that the petitioners violated the spirit of the cooperative movement, as encapsulated in the
preamble of the West Bengal Cooperative Societies Act, 2006. Such preamble is as foll-ows:
“An Act to consolidate and amend the law relating to Cooperative societies in West Bengal. WHEREAS in order to infuse a new life into the
cooperative movement of West Bengal on the face of the new challenge of globalisation and liberalization of Indian Economy, it is necessary and
expedient to make provisions to give healthy impetus and a sense of purpose for the cooperative movement in West Bengal, to facilitate the voluntary
formation and democratic functioning of the cooperative societies in the State, to ensure membersʹ involvement in making decisions, to make the
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cooperative societies selfreliant and vibrant by changing the vision and mission of the institutions as required to face a new competitive economic
sce-nario to promote thrift, selfhelp and mutual aid amongst the people with needs and interes-t in common, to provide for transparent, devoted and
efficient management and services relevant to the needs of the cooperatives, to diversify their activities, to put them on sound financial footing and to
increase production in all sectors of life including agriculture and industry and -above all to bring about economic and social regeneration including
better and hap-pier conditions of living for the weaker and poorer section of the community including womenfolk and to bring them within the fold of
cooperative movement and for that purpose to consolidate and amend the law relating to the cooperative societies in West Bengal.â€
Section 88(a) of the said Act contemplates that members of a housing cooperative society may construct their house either on their own or
through the cooperative society.
Again, Section 89(e) of the said Act envisages that the first board of the housing cooperative society shall call the first general meeting of the
society for the purposes of inter alia appointing architects, contractors and valuers, provided that such appointment shall be made after inviting
application for the same through a daily newspaper, if applicable, and that no person acting as an architect or contractor or valuer shall act as any of
the other two.
This apart, Rule 135(a) of the 2011 Rules provides that the board of a housing cooperative society has the power to appoint, suspend, remove or
discharge all persons engaged on payment of fees or on the basis of contract, such as contractors, solicitors, supervisors, engineers, valuers, architects
and surveyors.
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It is seen that nowhere in the Act or the Rules, the delegation of -construction work to third party developers, having commercial interest, is
contemplated.
The entire spirit of the cooperative movement, being that of participation of the members for their own good, was missed out in the commercial
endeavour of the petitioners to earn quick profits at the expense of the cooperative- spirit.
27.- The arguments of the petitioners, that the first component of the arbitral award becomes academic upon fulfillment of the second, is also not
acceptable, since the first component is a continuous restraint, independent of the second. The petitioners have, in any event, flouted both the
components of the award by posing to cancel the previous agreement with M/s HiRise and renewing the -same agreement in a superficially changed
format. The continuation of the earlier joint venture has also been reflected from the project submitted by the petitioners before the Registrar,
Cooperative Societies, purporting to seek approval.
The petitioners also rely on an annual report of an Annual General Meeting held by the petitioner no. 1Society on May 27, 2007, to impress upon
this Court that the award was complied with by the Society in spirit. -
However, apart from the fact that the award contemplated not an Annual General Meeting but a Special General Meeting, the report itself belies
the impression sought to be created by the petitioners. It is reflected from the report that the Board of Directors, even in the teeth of the award, did
not even consider any other option t-han to renew the previous agreement with M/s HiRise itself, -despite the specific restraint order comprised in the
first component of the arbitral award. The project entered into, as reflected from the annual report itself, contemplated only modification of terms of
the previous joint venture agreement, and blatantly exhibited the sole purpose of such project to gain merely Rs. 20 million (by virtu-e of enhancement
of the market value of the project being fully commercial). As such, although commerce ipso facto need not be deprecated, the tenor of the arbitral
award as well as the spirit of the cooperative movement, as contemplated in the West Bengal Cooperative Societies Act, 2006, was taken for a ride
by such acts of the petitioners. The resolution taken in such Annual G-eneral Meeting was an iteration of the absence of will on the part of the
petitioners to comply with the award and the deliberate attempt to carry on with old wine in a new bottle, having the shape of a new look agreement.
As such, it appears that although the impugned or-der was a bit on the miserly side as far as reasons are concerned, the conclusion arrived at in the
said order, as to the execution case being still maintainable in view of nonsatisfaction of the arbitral award, was valid.
As to the judgments cited by the opposite party on the scope of interference under Article 227 of the Constitution of India, this Court is of the
opinion that the principles laid down therein are wellsettled. Since no patent jurisdictional error is found in the impugned order, in any event, the said
judgments need not be gone into in detail.
In the aforesaid circumstances, the impugned order does not deserve interference under Article 227 of the Constitution of India.
Accordingly, C.O. No. 2714 of 2014 is dismissed on contest, without any order as to costs.