Madanlal Rathore & Others vs State Of Madhya Pradesh & Others

Shri K.P.Singh, Advocate for the petitioner has adopted the arguments raised by Shri A.K. Sethi, learned Senior Advocate appearing on behalf of the petitioners in W.P.No.5033/2019.

Petitioners have approached this Court by way of this writ petition being aggrieved by the Order dated 21.02.2019, passed under Section 53(12) of the Madhya Pradesh Co-operative Societies Act, 1960 ( in short 'Act of 1960') by which in place of "Board of Director", "Deputy Registrar, Co-operative Societies" has been appointed as Administrator temporarily. Before passing the said order the post of Directors which the petitioners are occupying have been declared vacant by Order No.293, 294, 295, 296, 297, 298, 299, 300 & 301/2019, Ujjain dated 20.02.2019 as their Society have committed default in payment of loan. The petitioners are not challenging the order dated 20.02.2019 and only challenging the order dated 21.02.2019 again which is nothing but a consequential order.

The District Co-operative Bank, Mandsaur is a society registered under the Act of 1960 having registration No.05 dated 19.07.1918. There are total 16 Directors in the Board of Directors of the bank and out of which, 11 are representative from the Primary Agricultural Credit Co-operative Societies. The term of Board of Director is 5 years from the date of its first meeting of the Board under the provisions of Section 49(7-A) of the Act of 1960. The last election was held on 30.09.2014 and the 5 years term would be completed on 30.12.2019. The petitioners are the members of Primary Agricultural Credit Society and they are elected as a representative from their respective societies to become members of the Board of Directors of the District Co-operative Bank, Mandsaur. According to the petitioners they are not personally or individual defaulter of the banks or the Societies for the period extending 12 months but their societies have committed a default for period of exceeding 12 months or taken advance for the period of exceeding 3 months.

The respondent No.3 has passed the various orders on 21.02.2019 declaring them disqualified to hold the post of Director in exercise of power under Section 50-A(2). Out of 16 elected members, 9 have been declared disqualified and one member has died, which is less than 50% of the total strength, therefore, in exercise of power under Section 53(12) the Joint Registrar vide order dated 21.02.2019 has appointed as an Administrator temporarily till the new elections are held and the new committee takes the charge. The petitioners have assailed the impugned order mainly on the ground that before passing the impugned orders they were not given any reasonable opportunity of hearing.

Shri A.K. Sethi, learned senior counsel appearing on behalf of the petitioners in W.P.No.5033/2019 submits that the impugned order is passed by invoking sub-section 2 of Section 50-A of the Act of 1960 contrary to the principles of natural justice and the requirement of the laws. Section 48-AA(1) of the Act of 1960 clearly provides that the action to disqualify an elected member can be taken only after giving him an opportunity of being heard. The said provisions makes it clear that if the board fails to take action within 2 months then only Registrar will take action relating to disqualified of the membership. In support of above submission he he has heavily placed reliance over the judgement passed by this Court in case of District Co-operative Agricultural and Rural Development Bank Vs. State of M.P. & Others, reported in 2015 RN 135 in which it has been held that the principles of natural justice need be read into Section 50-A(2) though it is silent regarding applicability of natural justice. The principles of natural justice must be read into unoccupied interstices of the statue, unless there is a clear mandate to the contrary. The writ Court has set aside the order passed under Section 50-A(2) because no opportunity of hearing was given to the Director of the Bank.

Shri A.K. Sethi, learned senior counsel appearing on behalf of the petitioners in W.P.No.5033/2019 further submits that copy of Order No./election/2019/351, 353, 355, 356, 368 dated 22.02.2019 were not supplied to the petitioners, therefore, in absence of those orders the petitioners have challenged the validity of the same. Now the petitioners as well as respondents both have filed copy of orders dated 22.02.2019. Shri A.K. Sethi, learned senior counsel further emphasized that before passing the order dated 22.02.2019, no enquiry was conducted and without verifying the fact whether the society has committed default or not, the post of Directors has been declared as vacant. That Gwalior bench as well as Indore bench of this Court has stayed the similar type of orders hence pray for admission and interim relief in favour of all the petitioners.

Shri V.K. Jain, learned Additional Advocate

General appearing on advance notice submits that the petitioners are having alternate remedy of appeal under Section 78 of the Act of 1960, therefore, the petition is liable to be dismissed on this ground alone. He further submits that there is a provision of opportunity of hearing before taking any action under Section 48 AA but the impugned orders have been passed under the provisions of sub section (2) of Section 50 A of the Act of 1960 in which there is no provisions of opportunity of hearing. The concerned Societies were directed to provide the records pertaining to loan and after perusing the record it was found that the societies are in default for the period exceeding 12 months, therefore, the petitioners who were elected as representative of those societies ceased to hold the office and the Registrar has rightly declared their seats as vacant. In support of his contention he has placed reliance over the judgement passed by the Division Bench of this Court in case of Rajiv Kumar Jain Vs. Veerendra Narain Mishra & Others, reported in 2012(2) MPLJ 237 and the unreported judgement passed in case of Santosh Patil Vs. The State of Madhya Pradesh (W.P.No.16576/2017, decided on 19.04.2018) by coordinate bench of this court in which it has been held that from bare reading of Section 50-A of the Act, it is clear that disqualification of an individual member of the society on account of his being defaulter and under proviso to sub-section 2, the disqualification is automatic and the member of society cease to hold the office as soon as there is default of loan or advance and Section 50-A nowhere provides for opportunity of hearing before taking such action . He further submits that in the case of District Co-operative Agricultural and Rural Development Bank (supra) the petitioners contended that they are not defaults and did not suffer any disqualification specified under the Act or Rules hence this court has held that opportunity of hearing is necessary but in the present case the petitioners have pleaded that their societies are defaulter, therefore, the disqualification of the petitioner is automatic and for which no opportunity of hearing is required. He further submits that no prejudice has been caused to the petitioner by not giving opportunity of hearing because the petitioners are not disputing that the Society is not in default. He is relying over the judgement passed by this Court in case of Maharaja Jiwajirao Education Society and Another Vs. State of M.P. & Others, reported in 2006(4) MPLJ 403 and in which it has been that the question of violation of principles of natural justice has to be judged upon the prejudice caused. He is also relying over another judgement  passed  by  the  Apex  Court  in  case  of Dharampal Satyapal Limited Vs. Deputy Commissioner of Central Excised, Gauhati and Others, reported in (2015) 8 SCC 519 in which it has been held that the decision making authority can itself dispense with the requirement of principles of natural justice on the presumption that no prejudice is going to be caused to the person against whom the action is contemplated.

Shri V.K. Jain, learned Additional Advocate General submits that in two matters, Co-ordinate Bench at Jabalpur have declined to grant the interim relief in identical cases. In view of the above, he submits that the petitioners are not entitled for interim relief and writ petition itself is liable to be dismissed.

Shri Rajesh Vyas, learned counsel appearing for respondent Nos.3 & 5 on caveat submits that the Deputy Registrar has already assumed the charge of the Board of Director on 21.02.2019 and the petitioners are having remedy under Section 78(2) of the Act of 1960. In support of his contention he has placed reliance over the judgement passed by the Division Bench of this Court in case of Chandra Shekhar Sahu Vs. State of M.P., reported in 2010 RN 208 in which it has been held that the appointment under Section 53(13) is a temporary appointment till the order of the Court is vacated or new elections are held and also held that the provisions of Section 48-AA of the Act and the provisions under sub-Rule 3 of Rule 45 are different and if the Society has been declared defaulter, no representative of the Society shall be eligible for election as the member of committee of such co-operative bank.

I have heard the parties at length and perused the record.

The petitioners are members of the Board of director of Indore Premiere Coo-operative Bank Limited by virtue of representative or delegate of their respective Primary Societies. Under Sub-section 1 of Section 50-A no person shall be qualified for the election as a member of Board of Directors, representative or delegate of the Society if he is in default for the period exceeding 12 months to the Society for any loan or advance taken and as per sub section (2) a person elected to an office shall cease to hold such office if there is any default of any loan or advance to the Society and the Registrar shall declare his seat vacant. As per proviso to sub-section 2 the person already elected to an office of Co-operative Bank from the Society shall cease to hold the office if such society commits a default for any loan or advance or for a period exceeding 3 months, the Registrar shall declare his seat vacant. Under sub-rule 3 of Rule 45 of the Madhya Pradesh Co-operative Societies Rule, 1962 also any representative of the society shall be held eligible for election as a member of committee of the Co-operative Bank, financing banks etc. and shall cease to hold his office as such if the Society is or gets into default for a period exceeding 12 months in respect of any loan taken it from such co-operative bank, financing bank, federal society or apex society. Therefore, it is clear from the aforesaid provision that the declaration of a seat as vacant is consequential action if the society has been declared as a defaulter society. The competent authority is required to enquire from the record and take a decision whether the Society has committed any default for any loan or advance. From the impugned order, it is clear that before declaring the concerned societies as defaulter, the records from the concerned society were summoned and after its verification it has been held that the societies are defaulter and then post of Director has been declared as vacant. Therefore, it is for the primary societies who have sent the petitioners as a representative to the Board of Directors of the Indore Premiere Coo-operative Bank Limited to challenge the decision of the Joint Registrar, Co-operative Society, Indore by filing an appeal under Section 78 of the Co-operative Societies Act. The petitioners are entitled for the relief if the appellate authority/ Tribunal set aside the orders of declaring defaulter in the appeal. The declaration of a seat as vacant is only a consequential order as per the proviso to sub-section 2 of Section 50-A. The concerned Societies are not petitioners before this court in this petition, therefore, the validity of the said order cannot be examined in this petition.

So far as the applicability of principle of natural justice is concerned, the petitioners themselves have admitted in para 5.7 of the writ petition that the Societies have committed the default. In case of District Co-operative Agricultural and Rural Development Bank (supra) this Court entertained the writ petition filed by the District Co-operative Bank itself not by individual Directors challenging the order of supersession. The Writ Court distinguished the order passed by the Division Bench in case of Rajiv Kumar Jain (supra) only on the ground that the petitioners have disputed that they are not defaulters and did not suffer any disqualification. In case of Rajiv Kumar Jain (supra), the Division Bench has observed that from the proviso of Section 50-A(2) it is clear that a person elected shall cease to hold the office if such Society commits a default and there is an admitted position that the Society has become the defaulter. Para 14 is reproduced below:

"14. From the aforesaid proviso to Section 50-A (2) of the Act of 1960, it is clear that a person elected to an office of a Co-operative Bank from a society shall cease to hold such office, if such society commits default. Admittedly, in the present case, the society, from which the respondent No. 1 had been elected as representative of the Co-operative Bank and thereafter he was elected as Board of Director of the Bank, became defaulter. In such circumstances, the Joint Registrar has rightly declared his seat vacant. The Division Bench in the case of Basant Kumar Vs. Assistant Registrar, Co-operative Societies, Jabalpur and others, 1969 MPLJ 683 = 1969 JLJ 1016 has held as under in regard to disqualification to hold a post in a society when a society disqualified to present the other society:--

"It was then contended that disqualification for a delegate or representative are all provided in Rule 45 and unless it can be said that the delegate or representative of the member society in the Committee of another society has himself incurred the disqualification under Rule 45, the delegate or the representative does not loss his seat in the Committee. There is no substance in this contention. A society to be a member in the Committee of management of another society must not suffer from the disqualifications mentioned in Rule 44. As a society can only function in the committee of management through some individual, the society must elect one of its members as its delegate. But Rule 45 provides that the delegate or representative so elected should also not suffer from any of the disqualifications mentioned in Rule 44. Thus, the requirements of the Rules are two fold. The member society must not suffer from any disqualifications mentioned in Rule 44 and the delegate elected by it to represent it should also not suffer from any of the disqualifications. The delegate however, has no independent existence. He only represent the society which is the real member in the committee and if the society ceases to be a member of the committee because of a disqualification incurred by it, the delegate will automatically ceased to be delegate although he may not have himself incurred any disqualification under Rule 45."

In this case, there is no disputed question of facts. The petitioners have suffered removal from the post of directors as a consequential action because their society has been declared defaulter, which is a requirement of law, therefore, in view of the law laid down in the case of Dharampal Satyapal Limited (supra) whether opportunity of hearing will serve the purpose or not, this has to be considered by the Court whether any prejudice is going to be caused against him if any action is taken. In view of above discussion, it is for the society to challenge the order of Joint Registrar and if the society succeeds and a tag of defaulter is removed, then only the petitioners are entitled for any relief.

So far as the validity of Order dated 21.02.2019 is concerned, by which the Board of Director of the Co-operative Bank has been ceased to function and the administrator has been appointed, it is for the bank to challenge the said order and not for the petitioners. Even otherwise, the petitioners are not challenging the validity of said order in this petition. Hence, I do not find any ground for admission and interim relief in this petition which is accordingly dismissed without notice to respondents.