Pundalik Kadhav vs District Deputy Registrar, Co-operative Societies, Chandrapur and others

M.S. Ratnaparkhi, J.—The extraordinary jurisdiction of this Court is sought to be invoked for quashing the order passed by the respondent No. 4 on 30th August 1989 in Revision No. RVA 2788/458/34/15C confirming the order of the District Deputy Registrar and the Divisional Joint Registrar, Nagpur. The order of the District Deputy Registrar passed u/s 73FF of the Maharashtra Co-operative Societies Act removing the petitioner from the Directorship of the Chandrapur District Central Co-operative Bank has also been challenged.

The facts giving rise to this litigation may be briefly stated as follows : The petitioner Pundltk Ganpatrao Kadhav is a cultivator of the village Talodi Khurd in Bramhapuri tahsil of Chandrapur District. He was a member of so many other societies including the Bramhapuri Agricultural Sales and Purchase Society. This society is affiliated to the Federal Society called the Maharashtra State Co-operative Bank, Bombay. In 1979 or so he had taken a loan of Rs. 10,000/- from the Maharashtra State Land Development Bank, Brahmapuri Branch, Brahmapuri. Out of this Rs. 7,000/- were by way of loan and Rs. 3,000/- were taken by way of subsidies. The loan was not repaid till 21st October. 1986. On the other hand, the installments remained unpaid.

On 18-8-1986 the petitioner was elected as one of the Directors of the Chandrapur District Co-operative Central Bank from the Brahmapuri Sales Purchase Society. He even now continues to hold that office. Section 73FF was brought on the Statute Book by Maharashtra Act No. XX of 1986 with effect from 12-5-1986. This section created a disqualification from being a member of the Committee in case the incumbent was a defaulter in the payment of any installment of loan granted to him. The original society, therefore, served a notice on him on 15-10-1986 u/s 137 of the Maharashtra Co-operative Societies Act directing him to make payment of all the outstanding loans by 24-10-1986. In pursuance of this notice, it is alleged that the petitioner paid all the outstanding dues on 21-10-1986.

On 8-1-1987 the District Deputy Registrar, Co operative Societies, Chandrapur served a notice u/s 78(1) of the Maharashtra Co-operative Societies Act asking him to show cause why he should not be removed from the Directorship of the District Co-operative Central Bank. Chandrapur as he was a defaulter within the meaning of the Act and as such disqualified from being director of the Chandrapur District Central Co-operative Bank. A copy of this notice was also sent to the Federal Society along with all the enclosures. The Federal Society (Bank) informed the District Deputy Registrar that they had no objection for taking the contemplated action against the petitioner in accordance with law. The petitioner appeared before the District Deputy Registrar and put up his say. One of the contentions was that he was not a defaulter within the meaning of the Act. Another contention was that no dues were outstanding against him when the notice dated 8-1-1987 was served on him. Third contention was that there was no effective consultation with the Federal Society. There were also other defences raised by him.

The District Deputy Registrar on hearing passed the impugned order on 7-12-1987 removing him from the directorship of the District Central Co-operative Bank. Chandrapur on the ground that he was a defaulter. This order came to be challenged before the Divisional Joint Registrar, Nagpur. The learned Divisional Joint Registrar, Nagpur on hearing the parties concerned, rejected the appeal on 15-2-1988 and confirmed the order passed by the District Deputy Registrar. This order came to be challenged before the State Government in revision. The learned Minister for State incharge of Co operation dismissed this revision by his order passed on 30th August 1989. It is this order which has been challenged in this writ petition.

Mr. Dharmadhikari, the learned Advocate for the petitioner raised five points before us. Firstly, according to him section 73FF of the Act was introduced for the first time in the Statute Book on 12-5-1986 and. therefore, the conduct prior to this date cannot be taken as a disqualification inasmuch as the Act has no retrospective effect. Secondly, according to him. the default must exist on the day when the action is proposed to be taken, i.e. in the present case, on the date when the notice is issued i.e. on 8-1-1987. Thirdly, according to him this can be one of the grounds for challenging the election, but as no election has not been challenged substantively, there cannot be any disqualification in the proceedings initiated by the District Deputy Registrar. Fourthly, it was pointed out that there was no effective consultation and lastly, it was contended that the revision was heard behind his back and it infringes the rule of natural justice. It will, therefore, be necessary to scrutinise these grounds.

The factual position is not much disputed. It is an admitted position that even in August 1986, when the elections to the District Central Co-operative Bank were held, the petitioner was in arrears to the Land Development Bank. Brahmapuri. What Mr. Dharmadhikari urged before us was that section 73FF was introduced for the first time on 12-5-1986 and, therefore, the conduct of the petitioner prior to that date cannot constitute the disqualification, which for the first time after this enactment is accompanied with penal action. In fact, there is no question of interpreting this section retrospectively. Even the learned Advocate for the respondents conceded that the section has no retrospective operation. With a view to appreciate the arguments of Mr. Dharmadhikari. it will be necessary to reproduce the relevant provisions of section 73FF of the Act. The section reads:

(I) Without prejudice to the other provisions of this Act Or the rules made thereunder in relation to the disqualification of being a member of a Committee, no person shall be eligible for being appointed, nominated, elected, co-opted or for being a member of a Committee if he -

(i) is a defaulter of any society.

Explanation. - For the purposes of this clause, the term "defaulter" includes -

(a) in the case of a primary agricultural credit society, a member who defaults repayment of the crop loan on the due date,

(b) in the case of a term Mending society'' a member who defaults the payment of any installment of the loan granted to him.

What this section contemplates is that a person who is a defaulter of any society incurs a disqualification of being a member of the Committee, This includes also the Directorship of the Chandrapur District Central Co-operative Bank.

What Mr. Dharmadhikari urged before us was that mere default in itself does not lead to disqualification, but when the statute lays down that such a default will lead to disqualification, then the conduct prior to the coming into force of this statute cannot be considered at all. It is this concept which Mr. Dharmadhikari treats as analogous to give retrospective operation to the Act. It is very difficult to accept this argument of Mr. Dharmadhikari. The provision, as it stands, is crystal clear. The provision contemplates that if on the date of election the member has incurred disqualifications enumerated in this provision, then he shall not be eligible to be appointed, nominated, elected or co-opted or for being a member of the committee. What is relevant for the purposes of this section is factual position as it stands on the day when he is contesting the election. If on that particular date he is a defaulter, then the law treats it as disqualification from being elected as a member of the society. If he is not a defaulter, then the disqualification does not follow. This is in short the meaning contemplated by section 73FF of the Act. We have, therefore, to find out whether on the date when the elections are held, the petitioner was a defaulter within the meaning of the Act. The notice served on the petitioner can be found as Annexure-A and it gives the details as to the dues that the petitioner was to pay at the beginning of each calendar year. According to the notice the dues are carried forward from 31-1-1981, 31-1-1982, 31-1-1983, 31-1-1984, 31-1-1985 and 31-1-1986. In some years the dues are paid partially. In some years they are not at all paid.

But there can be no dispute that the dues were outstanding against the petitioner even on 31-1-1986 and these dues flow from the dates of the loan which he took in 1979. The petitioner had a notice that on 31-1-1986 that dues of the society were outstanding against him and he did not dispute this factual position. There was some misconception when Mr. Dharmadhikari strenuously urged before us that the last dues were on 31-1-1986 as if the petitioner considered that after 31-1-1986 the dues were not in existence. The dues have been calculated on 31-1-1986 and unless they are paid they become the recurring dues. Thus the dues which were calculated on 31-1-1986 remained dues on every day following that day. They become the dues which the petitioner was liable to pay even on 12-5-1986 when section 73FF was brought on the statute. They continued to be the dues outstanding against the petitioner even on 18-8-1986 when the petitioner contested the election to the Directorship of the District Central Cooperative Bank. Chandrapur. This factual position has to be accepted. What Mr. Dharmadhikari urged before us was that till 12-5.1986 no penal consequence was attached to the non-payment of the outstanding dues. Conversely his argument was that the bar contemplated u/s 73FF of the Maharashtra Co-operative Societies Act would operate only in respect of the loans taken after 12-5-1986 in case the incumbent remains in arrears of those dues. It is very difficult to accept this sort of interpretation of the Statute. In fact, there is no question of giving any retrospective operation to the Statute, We have no doubt in our mind that section 73FF has to be interpreted with prospective operation and not retrospective. However, according to Mr. Dharmadhikari if penal consequences are attached to the dues, then it amounts to retrospective operation. In support of his contention reliance was placed on the ratio laid down in Amireddi Rajagopala Rao and Others Vs. Amireddi Sitharamamma and Others, . It appears that there is a lot of misconception about the ratio laid down. What the Supreme Court has observed is that if a party acquires any vested right under the common law. that right cannot be abrogated retrospectively by any Act. Our attention was invited to paragraph 7 of the report. The point before the Supreme Court was the interpretation of sections 21 and 22 of the Hindu Adoptions and Maintenance Act. The Supreme Court observed:

It is well recognised rule that a Statute should be interpreted if possible so as to respect vested rights and such a construction should never be adopted if the words are open to another construction.

Similar proposition was laid down in Punjab Tin Supply Co., Chandigarh and Others Vs. Central Government and Others, where the Supreme Court observed:

All laws which affect substantive rights generally operate prospectively and there is a presumption against their retrospectively if they affect vested rights and obligations unless the legislative intent is clear and compulsive.

These propositions are well accepted without any exception. The question that arises in the present case is whether there is any question of retrospective interpretation. The District Deputy Registrar, the Divisional Joint Registrar and the State of Maharashtra have not given any retrospective operation to the statute. They assumed that the statute has come into force on 12-5-1986 and then they examined the position which prevailed on 18-8-1986 when the elections were held. To repeat it once again the position is very clear. The petitioner was admittedly indebted to the society. His indebtedness was ascertained at the end of January every year starting from 1981. The indebtedness was specified even on 31-1-1986 and in spite of this specification or ascertainment, the dues remained unpaid. The liability to pay the dues continued even in May 1986 when the section 73FF was brought on the Statute Book and it continued even in August when the elections were held i.e. on 18 8-1986. The position which prevailed on 18-8-1986 was that the petitioner was a defaulter inasmuch as he did not pay the dues. In spite of his character of being a defaulter, he contested the election on 18-8-1986 and he succeeded in that election. Thus the factual position which prevails is that on the date he contested the election he continued to be a defaulter within the meaning of the Act.

Section 73FF has thus to be given its natural meaning. The authority concerned has to find out if on the date of the election he was a defaulter in payment of any installments of loan granted to him. If the authority finds that he was a defaulter, then he has to face a bar contemplated by sub-section (1) of section 73FF. The legislative mandate is to the effect that no person shall be eligible for being appointed, nominated, elected, co-opted or for being a member of the Committee if he is a defaulter in payment of any installment of loan granted to him. There is no question of prospective or retrospective operation. If on facts he is a defaulter, the mandate does not admit of any other thing, but to declare him as disqualified.

In fact this provision has not come for the first time on 12-5-1986. Under rule 58 of the Rules framed under the Maharashtra Co-operative Societies Act, similar provision was already considered. Instead of relying on the delegated legislation, the Legislature thought it fit to resort to the statutory provision in the statute itself. The spirit of the rule and the spirit of the present section 73FF is the same and there is no change. Thus from this point of view, there is no force in the arguments of Mr. Dharmadhikari, that by treating this default as a disqualification the authority has virtually given the retrospective effect to the Act.

It was next contended that the default must exist on the day when the action is proposed to be taken. There is no dispute that the action was initiated by a show cause notice issued on 8 1-1987. It is also an undisputed position that a notice u/s 137 of the Maharashtra Co-operative Societies Act was issued to the petitioner on 15-10-1986 directing him to pay all the dues before 24-10-1986 and in pursuance of that notice the petitioner paid all the dues on 21-10-1986. There is no dispute regarding this factual position. What was urged before us. and quite strenuously by Mr. Dharmadhikari was that the petitioner was not at all a defaulter when the notice dated 8-1 -1987 Annexure-A was issued.

It will be interesting to read the contents of the notice. No amount is claimed under this notice. What this notice says is that the petitioner was in arrears of the dues of the society and he being in arrears of the dues, he was incompetent to contest the election of a director to the District Central Co-operative Bank. Chandrapur u/s 73FF read with subsection (2) of section 73FF. Thus the purpose of issuance of this notice was not to demand any, dues from the petitioner, but it was to bring to his notice that he had already incurred a disqualification on the date when he contested the election to the District Central Co-operative Bank, Chandrapur. What Mr. Dharmadhikari urged before us was that the disqualification flows from the non-payment of dues and, therefore, there can be no disqualification if the dues are paid before any action is initiated. There are some inherent infirmities in this argument. What this section contemplates is the incompetence of a particular class of persons who fall within a particular category on the date when they contest the election. This is a prerequisite for eligibility to contest the elections. This has nothing to do with the monetary liabilities. In fact the disqualification flows from the conduct of a person in not paying dues to the society. Even if the dues are paid subsequently, that would only extinguish the debts but it would not in any case remove the disqualification that is created by the statute. Thus though the petitioner paid all the debts on 21-10-1986, and though thereafter he was never in arrears, he would not be absolved of the disqualification if he were disqualified on the date when he contested the elections. To repeat it once again the factual position which prevailed on 18-8-1986 (when the elections were held) the petitioner did carry with him the stigma of being a defaulter for years together. He went to the polls with this stigma attached to him. The subsequent payment of the debts, even in full, would not remove this stigma. The point which is germane to this controversy is whether on the day he contested the election he was a debtor or was not a debtor. If he were a debtor and a defaulter as contemplated by law. he would carry the disqualification with him. Even full payment of all the debts subsequent to that date would not wash out this disqualification.

Mr. Dharmadhikari. however, relied on the proposition laid down by the Kerala High Court in Abdul Rashid vs. State of Kerala. 1988 All India Co-operative Tribunal Journal 338. The Kerala High Court was considering the effect of rule 44 framed under the Kerala Co-operative Societies Act. The facts prevailing in that case were that the incumbent was indebted to the society in 1984. He contested the elections in 1984. The action was initiated against him rule 44(1) sometimes in November 1985, but before the initiation of this action he paid all the dues. The Kerala High Court held "in the present case, the disqualification ceased in July 1985 and the action under rule 44(1) was initiated in November 1985. There was no occasion to initiate action under rule 44(1) to disqualify a member who was admittedly elected in 1984." We went through the provisions of rule 44 of the Co-operative Societies Rules "as they prevailed in Kerala" and we find a lot of difference between rule 44 of the Kerala Rules and section 73FF of the Maharashtra Co-operative Societies Act. Though rule 44 created a bar from being eligible to be elected or appointed as member of the society on the ground of default, the power was vested in the Registrar to remove the bar to exempt any persons of the society from the operation of this bar. The power being vested in the Registrar to remove the bar either vis a vis society or an individual, initiation of action was necessary and here lies the difference between the two provisions of the Statute. u/s 73FF the bar is automatic and there is no necessity of initiation of any action. No action is required for adjudicating or declaring the disqualification. The action is required only for removal. This makes all the difference between the proposition laid down in the abovesaid case. In the present case, no initiation of the action is necessary. Thus the arguments advanced by Mr. Dharmadhikari do not take the case an inch further. The position, to repeat it once again Js. crystal clear. On the day of the election i.e. on 18-8-1988 the petitioner could not contest the election as he had carried with him the bar. By his subsequent payment this position remains unaltered.

This now takes us to another point, namely, that the election of the petitioner to the District Central Co-operative Bank, Chandrapur cannot be challenged u/s 78 of the Maharashtra Co-operative Societies Act. In fact nobody has challenged the election of the petitioner to the Directorship of that bank. What has been challenged is that he could not even contest the elections on the date the elections were held inasmuch as he was disqualified by operation of the statute. This being a bar against the eligibility, it is not necessary that could be canvassed only by election petition. When the statute provides for the remedy, then that remedy has to be resorted to. In the present case, section 78 of the Maharashtra Co-operative Societies Act empowers the Registrar to remove a member in case such a member was disqualified from contesting the election. This bar is open to challenge by election petition. Even the election petition does not abrogate or bar the powers of the Registrar u/s 78 of the Maharashtra Co-operative Societies Act.

Reliance was placed by Mr. Dharmadhikari on the decision Govindappa vs. Somasekhar Ishwarappa, 1979 (1) Karnataka Law Journal 124. The controversy in that case was quite different. In that case a person had filed his nomination paper. The nomination paper was objected to on the ground that he was disqualified. This objection was overruled. The person was elected. His election was challenged in the election petition. Section 70 of the Co-operative Societies Act specifically provided that such dispute shall be heard and decided by the Registrar. The Registrar, however, transferred this dispute to the Deputy Registrar. The question was whether this dispute could be transferred to the Deputy Registrar and what was laid down in the case was that the Registrar being the specified authority, he could not transfer this dispute to any other person. That ratio, therefore, does not help the petitioner in the present case.

It was then contended by Mr. Dharmadhikari that there was no effective consultation with the Federal Society. Our attention was invited to section 78(1) of the Act which makes the consultation with the Federal Society mandatory. There was no dispute before us regarding the legal position that the consultation with the Federal Society was mandatory before passing final orders. The factual position prevailing in the present case is that the District Deputy Registrar issued a show cause notice dated 8-1-1987 to the petitioner. Copy of this notice was also sent to the Manager, Brahmapuri Agricultural Sale Purchase Society. A copy was also sent to the District Central Co-operative Bank. Chandrapur, In addition the copy was also sent to the Federal Society and the Federal Society was requested to file its reply within 15 days. It was also made clear that if no reply were received within 15 days it would be presumed that the Federal Society consented to the proposed action. The order passed by the District Deputy Registrar shows that even the reply filed by the petitioner was sent to the Federal Society and by its reply dated 19-10-1987 the Federal Society informed the District Deputy Registrar that they had no objection for taking the action. There is no much dispute regarding this factual position that the relevant papers were sent to the Federal Society and the reply was received from the society to the effect that they had no objection to take the action. What Mr. Dharmadhikari, agitated before us was that there should be effective consultation in the sense that there must be an opinion expressed by the Federal Society one way or the other, meaning thereby that the Federal Society must give its opinion either to take the action or not to take the action. Reliance was placed for this proposition on the ratio laid down by this Court in Agricultural Produce Market Committee us. District Dy. Registrar. Co-operative Societies, 1986 Mh.LJ. 374, wherein this Court observed that the consultation is not an empty formality and that mere sending of a copy of the show cause notice without anything more cannot amount to consultation within the letter and spirit of the proviso. This court also reproduced the following observations of the Supreme Court in Chandramouleshwar Prasad Vs. The Patna High Court and Others, :-

Consultation or deliberation is not complete or effective before the parties thereto make their respective points of view known to the other or others and discuss and examine the relevant merits of their view. If one party makes a proposal to the other, who has a counter proposal in his mind, which is not communicated to the proposer. the direction to give effect to the counter proposal without anything more cannot be said to have been issued after consultation.

Reference was also made to the observations of the Supreme Court in S. Kewalram vs. District Dy. Registrar, Cooperative Societies (in SLP No. 4593 of 1988 decided on 18th August 1986 reported in 1986 (2) Supreme Court Reporter 398). These observations have been reproduced in Suresh vs. State of Mah. and others, 1987 Mh.LJ. 474. The observations are:-

...The learned counsel for the respondent has placed reliance on the affidavit in reply to show that a request was made to the Federation in order to elicit its opinion in regard to the proposed supersession but that the Federation had not given reply one way or the other. The expression "Previously consulted" means that the opinion of the Federation one way or the other must be taken into account before reaching the conclusion whether or not to supersede. It is no good answer to say that the opinion of the Federation could not be taken into account because no opinion was expressed by it; in the eye of law supersession cannot be said to have been made in consultation with the Federation. A reply from the Federation one way or the other should have been insisted upon and the opinion expressed by the Federation should have entered into the reckoning before the conclusion to supersede was reached.

There could not be any dispute regarding the requirements of effective consultation. We have inherent material on record to show that the copy of the show cause notice, the reply tendered thereto by the petitioner along with the documents was sent to the Bank. This we find in the affidavit of the respondent No. 1 and this position retains uncontroverted. We have some material apparent on the record which shows that the Federal Society did send a reply which it could be presumed that the Federal Society must have sent a reply on due deliberation. What the Federal Society says is what the action should be taken. Here is thus a case where all material relevant materials were made available to the Federal Society. The Federal Society did consider this matter and thereafter the Federal Society informed the District Deputy Registrar that they had no objection to take action as proposed. It is not a case where the Federal Society has not sent its reply. What is apparent from all these circumstances is that there was a process of consultation and it was an effective consultation. Effective consultation does not necessarily mean expressing a view in particular terms. What the term ''effective consultation'' requires is that all the material should be made available for the Federal Society for its scrutiny. The District Deputy Registrar cannot even force the Federal Society to send its reply. What he has to do under the statute is to make the material available to the Federal Society for its consideration and then leave the matter to the Federal Society. If that is done, then that would be tantamount to consultation and even effective consultation. A failure on the part of the Federal Society to respond Would not make the consultation ineffective. However, we need not go in the hypothetical arena. We have in this case the communication from the Registrar to the Federal Society. We have also in this case the Registrar sending all the material relevant to the Federal Society and in response the Federal Society has informed the District Deputy Registrar to take the action. We find nothing short of effective consultation in the present case.

This brings us to the last lap of this controversy. Mr. Dharmadhikari urged before us that no hearing was given to the petitioner when the Government heard the revision. Copy of the order passed by the Minister in revision is annexed with the petition and that order itself shows that a notice was sent to the petitioner by registered post. The notice was returned back to the sender. However, there is one more circumstance emerging from the record itself. The petitioner has submitted the written arguments before the revisional authority and it is there in the order of the revising authority that on consideration of the written arguments and on hearing the District Deputy Registrar he passed the order. It cannot, therefore, be said that any rule of natural justice was infringed. Hearing does not necessarily mean hearing across the table. It also includes the notes of arguments which contain all the points that a party wants to press along with the reasons. We have no doubt that there was a hearing inasmuch as written arguments were submitted before the authority.

Thus we are satisfied that on the date the petitioner contested the election, he was disqualified inasmuch as he was a defaulter. This disqualification could, not be removed by subsequent payment. Subsequent payment, if at all, merely extinguishes the debt, but does not remove the statutory disqualification. We are also satisfied that the reasons given by the lower authorities that the District Deputy Registrar was competent to decide this matter. There was also effective consultation between the District Deputy Registrar on one hand and the Federal Society on the other. In these circumstances, we find ourselves unable to disagree with the conclusions reached by the authorities and that too on good material before them.

The result is that there is hardly any merit in the petition, with the result that it is dismissed, with no order as to costs. Rule is discharged.