M.L. SEHGAL & ORS. vs SHALU CHANDNA & ORS.

This order will decide the above said nine revision petitions which are between the same parties and common questions of law and facts arise, though the amount of certain FDRs is different in some cases. We have taken the facts from the case RP 3733 of 2013.

The parties in question have locked horns over the payment of amount deposited in various FDRs. The case of the complainant No.1, Ms. Shalu Chandna and her father, Sh. Gulshan Rai Chandna, complainant No.2, shortly stated is that they had deposited huge amount with the Society under Fixed Deposit Receipts. The details of the deposited amounts in the shape of FDR with its maturity dates in different complaints, is as follows :-

Sr. No. CC No. FDR No. Dated Amount In D.O.M. Interest Interest paid upto

283 10828 29.01.2009 53,625/- 31.01.2010 12.5% 29.01.2009

284 10821 29.01.2009 20,000/- 18.05.2009 12.5% 29.01.2009

285 10819 29.01.2009 40,000/- 30.03.2009 12.5% 29.01.2009

286 10815 29.01.2009 40,000/- 30.03.2009 12.5% 29.01.2009

287 10814 29.01.2009 20,000/- 30.03.2009 12.5% 29.01.2009

288 10811 29.01.2009 20,000/- 18.05.2009 12.5% 29.01.2009

289 10809 29.01.2009 25,000/- 18.05.2009 12.5% 29.01.2009

290 10808 29.01.2009 20,000/- 18.05.2009 12.5% 18.01.2009

291 10803 29.01.2009 25,000/- 18.03.2009 12.5% 29.01.2009

The Van Khandi Co-operative Non-Agriculture Thrift & Credit Society Ltd. (Regd.), Ambala City, OP1, was running its business of providing loan and inviting deposits of the public at large at Ambala City. Mr. Pramod Singh Rana, OP2, who is the President of OP1, Mr.M.L. Sehgal, Vice President/OP3, Mr. Satish Kumar, Member, Managing Committee/OP4, have been arrayed as OPs in this case.

The allegation of the complainants is that after the maturity date, the OPs did not make the payment of the maturity amount to the complainants. The District Forum came to the conclusion that Sh. M.L. Sehgal did not play any role in this respect, because he had already tendered his resignation to the Society. The District Forum granted relief to the complainants against the OP Nos. 1, 2 & 4 and passed the following order:- "1. To pay the respective maturity amount of each FDR to the complainants with future interest @ 8% p.a., from the date of respective maturity of each FDR till actual realization.

Also to pay Rs.2,000/- as costs of litigation in each complaint".

First Appeal was filed before the State Commission, by the complainants. The State Commission accepted the appeal against the OPs. All of them were saddled with the liability, jointly and severally.

We have heard the counsel for the parties. The learned counsel for the petitioner/M.L.Sehgal, argued with vehemence that the petitioner had resigned on 14.04.2004. The resignation was sent to the Society through UPC. The Assistant Registrar, Co-operative Society, Haryana, accepted his resignation. Thereafter, Sh.M.L.Sehgal did not participate in the proceedings of the Society nor had he any role to play. He cannot be burdened with the above said liability. He also contended that he is also protected under the Haryana Co-operative Societies Act, 1984.

The second submission made by the counsel for the petitioner was that the position of a Member of this Society can be equated with that of a Director, as Director is not personally liable. In this regard, he had invited our attention towards the judgment in the case titled The Ashoka Brick Kiln Co-operative Industrial Society Ltd. Vs. State of Punjab & Anr., Civil Writ No.1/1965, decided on 30.10.1968, reported in (1969) 23 STC 43 (P&H), wherein, at para Nos. 3 & 4, it was held :- "3. The important point of law which I am called upon to decide in these cases is with regard to the recovery proceedings started by respondent No. 2 for the recovery of sales tax levied from the members of the petitioner-society by arresting them or attaching their properties. The petitioner-society is a co-operative society registered under the Co-operative Societies Act, 1912, and the liability of the members is limited. It is thus evident that the members of the society cannot be held liable for the debts of the society and they are only liable to contribute to the assets of the society to the extent of the liability undertaken by them. This liability can be enforced against them by the society while it is a going concern and by the liquidator after it is ordered to be wound up. The only exception is that under Section 67 of the Punjab Co-operative Societies Act, 1961, any amount due to the Government in the said Act can be recovered from the members to the extent of their liability. The sales tax levied on the petitioner-society cannot be said to be "sums due to Government under the Punjab Co-operative Societies Act, 1961" and, therefore, cannot be recovered from the members of the society under that section.

It was held by a Division Bench of this Court (Dua and Mahajan, JJ.) in Surinder Nath Khosla v. Excise and Taxation Commissioner, Punjab, and Anr. [1964] 15 S.T.C. 838, that the managing director of a limited company registered under the Indian Companies Act cannot be arrested for the realisation of arrears of sales tax due under the Blast Punjab General Sales Tax Act, 1948, from the limited company and an incorporated company is a juristic person which is a separate entity distinct from any individual shareholder and the business carried on by the company belongs to it in its juristic capacity and not to its shareholders. These observations of the learned Judges apply equally to the case of a co-operative society wherein the liability of the members is limited. It is, therefore, held that the members of the society are not liable for the payment of the sales tax levied on the petitioner-society and no amount on this account can be recovered from them either by the attachment and sale of their properties or by their arrest or any other coercive method".

He has also invited our attention towards the Haryana Co-operative Societies Act, 1984. In Surjit Singh Vs. Harbant Kaur, 1989 (1) RRR 444, it was held that loan due from Society cannot be recovered from Members in their individual capacity.

It was also argued that a criminal case is pending and this case entails the question of fraud and embezzlement which can be decided only by the Civil Court. The case pending before the consumer Fora is not maintainable. The Society is still running and the amount should be taken/recovered from the Society.

We are unable to locate some substance in these arguments, for the following reasons. First of all, the law cited above is not applicable to the facts of this case. The facts of this case are different. The law enshrined in Haryana Co-operative Societies Act, 1984, has crystalline clarity.

Moreover, the petitioner has made a vain attempt to keep the real facts under the hat. This is an admitted fact that the Assistant Registrar accepted the resignation of Sh. M.L. Sehgal and an appeal was preferred before the Registrar, Co-operative Societies and the said Appeal was accepted by the Deputy Registrar, Co-operative Societies by setting aside the order passed by the Assistant Registrar, Co-operative Societies.

As per the order of the State Commission, on the one hand, Mr.M.L.Sehgal was feigning that he had resigned from the Society, but at the same time, he was taking part in day-to-day functioning of the Society by issuing cheques, drafts, etc., to various customers as is evident from the photocopies of the cheques dated 13.06.2007 to 13.07.2007 which were issued by Mr.M.L.Sehgal and one Mrs. Poonam Mittal, in capacity of Authorised Signatory, had also issued cheques in the capacity of Secretary of the Society, favouring different persons on 29.05.2005 and 07.08.2005 and also in his own favour on 27.03.2005, 27.03.2005 and 20.03.2006. He also signed FDRs bearing Nos. 6505, 6026 1021 on 29.05.2005, 14.04.2005 and 07.08.2005, respectively. The State Commission came to the conclusion that this fact is indicative that Sh.M.L.Sehgal was not only actively participating in the day-to-day functioning of the Society, but has also been signing important financial documents in the nature of issuing cheques and fixed deposit receipts.

This is an unsavoury volte face on his part. The petitioner cannot ride both the horses, at the same time. A flip-flop attitude adopted by him, further casts a flim of doubt over his bizarre conduct.

The State Commission has also mentioned that he has written various letters, including one dated 13.11.2005, which was received in the Office of the Registration, Co-operative Societies under Receipt No.2542 dated 14.11.2005. In this way, he tried to manipulate the records. The State Commission rightly came to the conclusion that the entire theory of resignation of Mr.M.L.Sehgal is mere concoction to avoid his liability being fixed upon him in the litigation. The State Commission correctly did not accept the contention that he has resigned. Moreover, the petitioner himself admitted that he had attended the proceedings on 25.06.2004, i.e., after his ''so-called'' resignation, on 14.04.2004.

As a matter of fact, the Society is not running after the year 2008. The Society does not have any amount. There were as many as 250 complaints against the petitioner and an amount of Rs.2.00 crores is involved. He has never resigned and is at the helm of all affairs. All the signatures belonged to him. He has to account for the money.

In another incident, he had issued cheque which was dishonoured, he has been sentenced to two months'' simple imprisonment by the learned Judicial Magistrate - Ist Class, Ambala, though the appeal is still pending.

It was argued by the counsel for the respondent that the respondent was posted as GMA, State Bank of Patiala, where his services were terminated. To our mind, the main liability lies with the petitioner himself. The love of money is the root of all evil. The petitioner has made a vain attempt to pull the wool in the eyes of law and in the Members of the Society. Money without brains is always dangerous. The State Commission has nowhere missed the wood for trees. We add our voice to them.

The revision petitions are dismissed with costs of Rs.25,000/- in each of the nine cases, which be paid to each of the complainants/ consumers, by the Petitioner, in equal proportion, through demand drafts, directly, drawn in the name of each of the complainants, within 90 days'', from the receipt of this order, otherwise, it will carry interest @ 9% p.a., till its realization.