Ramrao Bala Zhalte and others vs State of Maharashtra and others

B.N. Deshmukh, J.—This Petition is filed to challenge the order passed by the Director of Sugar and Joint Registrar of Co-operative Societies, Maharashtra State, Pune, dated 9th May, 1989, by which the Board of Directors of Devgiri Sahakari Sakhar Karkhana - Respondent No. 3, has been reconstituted.

The Petitioners contended that, in fact, as per law, the Board of Directors was nominated by the Director of Sugar and Joint Registrar of Co-operative Societies, Maharashtra State, Pune, consisting of eighteen Members, as per the provisions of law and byelaws, on 9th March, 1989. But, the said Board is tried to be reconstituted by order dated 9th May, 1989 by substituting others persons, in place of the Petitioners. In effect, by order of reconstitution of the Board of Directors, the Petitioners are removed as Members of the Board, as they were initially nominated by the authority vide order dated 9th March, 1989.

Shri Talekar, learned counsel for the Petitioners, contended that the order of reconstitution dated 9th May, 1989 is in violation of Byelaw No. 28. He also contended that the order suffers from mala fides, both legal and factual. The other contention of Shri Talekar is that the order is passed, removing the petitioners from the Board of Directors, without following the procedure prescribed by section 78 of the Maharashtra Co-operative Societies Act. At any rate, they are removed from the Board in contravention of the principles of natural justice, inasmuch as none of the Petitioners were heard nor noticed before their removal from the Board of Directors in the name and style of reconstitution of the Board.

It is not disputed that the Petitioners were nominated as Members of the Board of Directors by order dated 9th March, 1989 and their names are removed by the order dated 9th May, 1989. Instead of the Petitioners, some other persons, namely Respondents Nos. 4 to 16, were replaced as Members of Board of Directors of Respondent No. 3.

It is worthwhile to consider the provisions of byelaw No. 28 of the approved byelaws of the Devgiri Co-operative Sugar Factory - Respondent No. 3. Byelaw No. 28, reads as follows : -

Byelaw No. 28, thus, empowers the Director of Sugar and Joint Registrar Of Co-operative Societies to nominate a temporary Board of Directors, including its Chairman and Vice-Chairman, after consultation with the Government of Maharashtra, for a period of five years. Any change in the Board of Directors can also be effected by the Director of Sugar and Joint Registrar of Co-operative Societies only in consultation with the State Government. The main challenge, therefore, to reconstitution of Board made by order dated 9th May, 1989 is, apart from the challenge by way of mala fides, that the provisions of byelaw No. 28 are completely ignored, while issuing the order for reconstitution of the Board, as there was no consultation between the Director and the Government of Maharashtra. The allegation is that the list, which was prepared at the instance of the Chief Minister, is forwarded to the Director of Sugar, and the Director has, accordingly, issued the order. In fact, there was no consultation, as contemplated by byelaw No. 28, between the Joint Director of Sugar, who issued the order of reconstitution of the Board, and the Chief Minister, or, the State Government.

There is much substance in the contention of Shri Talekar in the challenge to the reconstitution of the Board. There is ample material produced, and the whole record was made available to us in this connection by the learned Advocate-General. It would suffice to refer to the letter dated 6th May, 1989 written to the Director of Sugar by the Under Secretary to the Government. In this letter, the names of the Directors, as well as the Chairman and Vice-Chairman, were communicated to the Director of Sugar. It was also mentioned that, as per the orders issued by the Chief Minister, the Director of Sugar shall issue the orders, only in accordance with the directions of the Chief Minister. This endorsement is dated 9th May, 1989. It is further mentioned in the letter that the Director of Sugar shall have now to mention in his new order of the reconstitution of Board that initial order dated 9th March, 1989, by which the Board was constituted for the first time, was issued by him without consultation with the Government. However, the order must also mention that the order, which is now subsequently passed, is passed by the Director after proper consultation with the Government. The Director was directed by that communication to mention all this in the second order in clear terms. It was further stated in this communication that the disqualifications of any of the persons mentioned therein shall be looked into.

Surprisingly, though the communication is dated 6th May, 1989, the endorsement on the front page of the communication indicates that the communication was not handed over, or, was not delivered to the Director of Sugar till 9th May, 1989, because the endorsement by the concerned officer on the front page is dated 9th May, 1989, i.e., the date on which the second order is issued by the Director. Therefore, it seems that, on receiving the directions of the Chief Minister on 9th May, 1989, the Director of Sugar issued the order on the same day, reconstituting the Board. The directions regarding consideration of disqualification of any of the Members were just ignored, in view of the clear cut and imposing directions given to him alleged to have been given by the Chief Minister. The whole communication, if read in its proper perspective, is in utter violation of the provisions of byelaw No. 28.

In fact, the power under byelaw No. 28 is given to issue such orders to the Director of Sugar and Joint Registrar of Co-operative Societies. Only restriction on the power is, that, he must do so after consultation with the Government, but, in the present case, what was left to the Director of Sugar was to issue the order in his name only. The contents of the order were communicated to him in clear terms and there was absolutely no option left to him to make proper order, after taking into consideration the provisions of byelaw No. 28. Order dated 9th May, 1989 is, therefore, in contravention of byelaw No. 28.

There are contents in the Petition relating to mala fide action of the State Government in issuing the order of 9th May, 1989. The statement in the Petition relates to factual, as well as legal mala fides. It is very difficult to connect the factual mala fides directly with the Chief Minister, because, from the record, we do not find any justification to hold that the Chief Minister had acted in this matter in any mala fide manner. It is true that the letters were written to the Chief Minister, for making change in the Board of Directors, by the Member of Parliament, and also by some other persons; but the demand of change in the constitution of the Board cannot be said to be unwarranted or unjustified in the present case, because of the circumstances in which the first order of Constitution of Board was issued by the Director or Sugar. Merely because the change was effected on the basis of letters written by the Member of Parliament or some other persons, it cannot be, therefore, said that the action was purely a mala fide action on behalf of the State Government. Though the action in the constitution of the Board is quite illegal by itself, it cannot be said that it was also mala fide in the circumstances of the present case.

We have gone through the entire correspondence relating to the nomination of the Board at the first instance, and its reconstitution thereafter on 9th May, 1989. Shri Talekar, however, contended that the nexus of mala fide action in promulgating the second order by the Director is with the first order of formation of the Board for the first time. According to him, what prompted the second order is that some of the relatives of the Chief Minister were not provided for in the earlier order, and, to make such a provision, the second order is passed, ignoring all norms and canons, which are required to be followed in the nomination of such Members on the Board. According to him, the Vice-Chairman, nominated in the order dated 9th May, 1989, is closely related to the Chief Minister. But, he had to concede that even the first order of nomination of the Board of Directors provides for a Member, who is related to the Chief Minister. We do not find any nexus in promulgation of second order and the first order in the light of the entire correspondence put before us. The mala fide action cannot be presumed, merely because the change was brought about at the instance of the Member of Parliament, belonging to the same party as that of the Chief Minister, or, merely because of some of the persons, who are politically aligned to, the Chief Minister. The allegation could have some Substance if the order initially issued, nominating the Board, was legal and proper.

If the first order of nomination of the Board is not legal and proper, the irregularity, or, illegality, if brought to the notice of the Chief Minister, or, of any higher authority, may be at the instance of persons belonging to the same party, cannot be said to be motivated by any mala fide action. The things could have been seen differently, if the first order itself was legal and proper. Anybody, including Members of Parliament and other persons, have a right to bring to the notice of the Chief Minister the irregularity and illegality caused in promulgating the first order nominating the Board of Directors.

Having come to the conclusion that the order dated 9th May, 1989 cannot sustain for a moment, because the Director of Sugar, who was competent to nominate the Board of Directors, was left with no choice, except the appointment of the Board of Directors, as mentioned in the communication dated 6th May, 1989; the order, therefore, cannot be said to be in accordance with law, or, the spirit of the provisions of the Statute and the byelaws. The discretion, which was left with the Director, under Byelaw No. 28 was with some purpose; but the right of Director was taken away in the present case.

Byelaw No. 28 provides that the list of Members of the Board of Directors shall not include any person, who is disqualified under the relevant provisions of the byelaws. Such enquiry can only be made at the Directorate level. There was hardly any scope left for holding such enquiry by the Director before passing the order. The order was passed in compelling circumstances.

The next question, which is required to be considered is : Whether, after setting aside the order dated 9th May, 1989, it is possible to say, or, contend, that the order dated 9th March, 1989 gets automatically revived, or, should be permitted to be revived? Surely, those would have been the consequences of setting aside the order of the reconstituted Board. But, in the present case, it cannot be said that the order dated 9th March, 1989 was legal and can be allowed to remain alter setting aside the second order of reconstitution of the Board. Shri Talekar contended that this Petition is filed by the Petitioners for setting aside the orders passed by the Director of Sugar and Joint Registrar of Co-operative Societies, dated 9th May, 1989 and there is no prayer, or. there is no other Writ Petition filed by anybody, challenging the order dated 9th March, 1989 and, in absence of any challenge to the order dated 9th March, 1989, it is not open for this Court to consider and set aside the order dated 9th March, 1989. The natural consequences of setting aside the order, dated 9th May, 1989, should be allowed to follow.

We are unable to appreciate this contention of Shri Talekar, because the whole matter, relating to the orders dated 9th March, 1989 and 9th May, 1989 is before us. The learned Advocate-General had produced the entire correspondence relating to both the orders dated 9th March, 1989 and 9th May, 1989. In these circumstances, we cannot take a technical view and consider the legality of second order only, without considering the legality of the first order.

It is well-known that in the State of Maharashtra, the sugar industry is one of the important industries. Not only that, the main finance of such factory, is either of the Government, or, the Public finance even to the extent of more than 95 percent. The other finance of the sugar factory cannot also be said to be a Private finance. That is also a Public Finance, may be in the nature of share capital, or, deposits in any other nature. The Board, therefore, has to function effectively and the constitution of the Board must be proper and legal, having regard to the provisions of the Statute and the Byelaws. If the initial constitution of the Board suffers from any irregularity, or, illegality, ab initio, then the Board cannot be allowed to continue.

The learned Advocate-General pointed out to us the background, in which first order dated 9th March, 1989 came to be passed by the Director of Sugar. It is the case of the Petitioners themselves, and which cannot be disputed, that the list was actually, forwarded by the Chief Promoter to the Chief Minister and the Chief Minister merely endorsed the list. The endorsement is produced at page 43. The endorsement by the Chief Minister mentions that there shall be no objection to approve the names contained in the accompanying list. The further endorsement is that the proposal shall be prepared and forwarded immediately. That endorsement is dated 3rd March, 1989. It seems that the communication by the Chief Promoter was further processed in the Co-operation Department, as, we find that there are signatures of the Officers at the Secretariat level, followed by the endorsement by Chief Minister. The learned Advocate-General also invited our attention to the letter dated 7th March, 1989, which was written by one Mr. Vad, who is Joint Secretary in Co-operation Department. This letter was written by him to the Director of Sugar, Pune, informing him that photo-copy of the endorsement of the Chief Minister, dated 3rd March, 1989, on the list forwarded by the Chief Promoter Mr. Gadekar, is forwarded to the Director for Information and, further, the Director of Sugar was asked to issue orders as per the directions given by the Chief Minister by way of his endorsement. The Director was also asked to submit the compliance report. The learned Advocate-General, in the background of this correspondence, contended that the consultation required as per byelaw No. 28, between the Director of Sugar and the Government, has not taken place at all. The consultation, if any, from this can be inferred, at the most, between the Chief Minister and the Chief Promoter; but there is absolutely no consultation between the Director and the Chief Minister before nominating the Board of Directors on 9th March, 1989.

18-A. Shri Talekar, however, contended that the material on record is enough to indicate that there was consultation between the Director of Sugar and the Chief Minister: The consultation can be gathered from several factors. According to him, the consultation may be initiated at any level; but merely because the list was initiated at the Chief Minister level, or, at the level of the Chief Promoter, it cannot be said that there was no consultation between the Director and the Chief Minister. The communication shows that the Chief Minister had considered the list and approved the names, after proper application of mind, and the Director was asked thereafter to issue the orders. What is to be seen in such kind of consultation is, the meeting of the minds between the parties at both ends. According to him, if the Director had any objection to the list forwarded to him, by the Chief Minister, he would have done so But as the orders were issued in accordance with the directions of the Chief Minister, it will have to be presumed that the Director has issued the orders after consultation with the Chief Minister. He also contended that byelaw No. 28 provides for consultation between the Director and the Government. The Director is an Officer of the State Government. In the light of the provisions of byelaw number 28, there cannot be any consultation other than the consultation, which has taken place in the present case. His further contention is that, as all the Members of the Board of Directors, as per the order dated 9th March, 1989, are eligible and qualified to be Members of the Board of Directors, there was no question of any further consultation between the Director and the Chief Minister, because the question of consultation can arise if any of the Members was disqualified as per byelaw No. 27. According to him, on the communication of the list by the Chief Minister, the consultation was complete and it came to an end, and there was no question of holding any further consultation. What had remained was, issuing of the order and, accordingly, the order has been issued by the Director on 9th March, 1989.

We are unable to appreciate this contention of Shri Talekar in this connection. It is true that the consultation may be initiated at any level, but the consultation must be effective and meaningful one between the parties at both the ends. In the present case, there is complete absence of consultation between the Director and the Chief Minister. The learned Advocate-General has invited our attention to the decision of the Division Bench of this High Court, reported in 1987 Mh.L.J. 474. Suresh Dnyandeo Khumkar and others vs. The Slate of Maharashtra and others. While considering the provisions of section 78 of the Maharashtra Co-operative Societies Act, this Court has held that, for having effective consultation, the consulting authority must place sufficient material and give all relevant information to the federal society, so that it can form its opinion in regard to the matter upon which it is being consulted. Sufficient time should be given to the Federation for giving its opinion.

In the present case, the Director was required to consult the Chief Minister as per byelaw No. 28. Even assuming that the Chief Promoter, in the nature of things, can move the Chief Minister for nominating a Board for the first time as per Byelaw No. 28; but, for forming opinion by the Chief Minister on the names of the Board of Directors; and the consultation contemplated in byelaw No. 28 to become effective and meaningful, requires that the Chief Minister should be provided with sufficient material and should be given all relevant information, so that he can form his opinion on the basis of the material provided to him. The consultation is not at all a hollow formality. The consultation is an important function under byelaw No. 28, because a Board is to be nominated to a body, which is created out of Public funds. In the present case, we are not concerned as to who provided the material to the consulting authority. The material may be provided by the Director of Sugar, or, may be provided by the Chief Promoter, or, may be provided by any other agency; but there must be some material provided to the Chief Minister and relevant information supplied to him, so that he will be able to form his opinion. We are quite in agreement with the ratio laid down in that decision. In the present case, except forwarding of the list by the Chief Promoter, there is absolutely no material which was supplied to the Chief Minister, to form his opinion. This indicates absence of effective and meaningful consultation with the Chief Minister in the matter of nomination as per byelaw No. 28.

Shri Chaudhari, appearing for the Respondents, contended that the provisions of byelaw No. 28 provide for consent of the State Government, and not for consultation with the State Government. Copy of the byelaw maintained in the office of the Regional Director of Sugar was made available to us. Though it seems that, originally, byelaw provided for the consent of the State Government, the same is amended and, instead of ''consent'', the word ''consultation'' is substituted. The provisions of byelaw, as approved and as in force on today, therefore, provide not for consent of the State Government, but for the consultation of the State Government. But, the question of supplying the material and relevant information, either in case of consultation or consent, remains the same. Even for consent, the Chief Minister, or, the authority of the Government, would be required to be supplied with material and relevant information. Taking the provisions of byelaw, as amended or original, in our opinion, that does not make difference, so far as the present case is concerned.

We have gone through the contentions of the Petitioner. There is nothing in the Petition, which will indicate that the names were, in fact, discussed and considered by either of the parties before the Chief Minister, and thereafter, the Chief Minister had put his endorsement on the list forwarded by the Chief Promoter. That also shows lack of consultation.

Shri Talekar, however, relied upon the decisions of this Court to contend that there was proper consultation, and also to draw an inference that there was consultation between the Chief Minister and the Director. He has also invited our attention to the decisions of this Court to point out that reconstitution of the Board really amounts to removal of the Petitioners from the Board of Directors, and, in these circumstances, provisions of section 78 of the Maharashtra Co-operative Societies Act are attracted. Admittedly, the second order is issued without notice, or hearing to the Petitioners.

In Shripatrao Limbaji Kadam and others vs. State of Maharashtra and others. 1979 Mh.L.J. 267. this Court had held that if it is found by the Registrar that the Committee has not conducted the affairs well and had found it guilty of any clause that follows in the sub-section once that situation develops and the Registrar follows the procedure of issuing show cause notice and satisfying himself after hearing the Members an occasion arises for the removal of that Committee by an order of the Registrar. Relying on these observations, Shri Talekar contended that the Petitioners are removed without giving them any show cause notice, or. any opportunity of being heard. We are unable to agree with Shri Talekar. According to this judgment, if a Committee, or, any Member of the Committee, is required to be removed for the reasons mentioned in that section, in that event, the Registrar is required to give notice to the Committee, or such Member. In the present case, the Members of the Committee, or, the Committee, is not tried to be reconstituted for any misconduct or negligence of duties either by the Committee, or, its Member. In that judgment, this Court has itself held that the scheme of section 78, read (sic) whole, implies on restraint upon the right of the Registrar to exercise the power under that Section. The very function, or, purpose of appointing a committee, or Administrator, is to set right the mismanagement of the Co-operative Societies and to restore normalcy in its administration. In fact, the very right of the Registrar to remove the elected body flows from the fact that the Committee is found guilty of either of the situations described in sub-section (1) of section 78. The present action cannot be, therefore, said to flow from the provisions of section 78(1) at all, and, therefore, it was not obligatory to give show cause notice to the Petitioners, or, a reasonable opportunity of being heard.

In Sheshroa Bhauro Jadhav Vs. Commissioner, Aurangabad Division and Others, both the points regarding consultation and giving hearing to the Members of the Village Panchayat, after the orders of bifurcation are issued, are considered by this Court. It is not necessary to refer to the observations of this Court regarding consultation in this judgment, but while negativing the argument regarding notice to the Members of the Village Panchayat, before issuing order of bifurcation u/s 4 of the Act, this Court has held that Members of the Panchayat individually need not be given hearing, because it is not necessary in each and every case to give hearing to the concerned persons. It will depend on the nature of the order to be passed. In the matter of consultation of Village Panchayat, it was not necessary to give hearing to each and every Member of the Village Panchayat. As we are of the view that the Government has passed the order, not under the provisions of section 78 of the Maharashtra Co-operative Socieites Act, but has passed the order under the provisions of byelaw No. 28, question which is relevant is the consultation, and mainly the consultation between the Director of Sugar and the Chief Minister. In these circumstances, it cannot be said that the Petitioners were, in fact, entitled to the notices of hearing in the matter.

A reference can also be made to the Division Bench decisions of this Court in Writ Petition No. 364 of 1989 with Writ Petition No. 372 of 1989, where, while considering the provisions of Section 78 of the Maharashtra Co-operative Societies Act, this Court has held that the principles of natural justice are not required to be followed while removing the appointed bodies. There is no dispute that the present body is such appointed body, and the body constituted on 9th March, 1989 was such an appointed body under the Provisions of Byelaw No. 28.

In Chandrika Jha Vs. State of Bihar and Others, , while considering the provisions of the Bihar Co-operative Societies Act and the Rules, the Supreme Court has held that the State cannot for itself exercise the statutory function of the Registrar under the Act or under the Rules. In the present case, both the orders were directed to be issued by the State Government. The Byelaw, in fact, empowers the Director to exercise powers in the matter of nomination of the Board for the first time. Here also, the State Government has exercised the statutory functions of the Registrar, which they could not have done in the light of the ratio laid down in this judgment.

In the result, we set aside the orders passed by the Director of Sugar and Joint Registrar of Co-operative Societies dated 9th March, 1989 and also dated 9th May, 1989.

On the question of interim arrangement, it was stated at the Bar that, in the nature of things, the State Government follows the practice of appointing the Chief Promoter as the Chairman of the nominated Board under byelaw No. 28. The practice seems to be based on a very sound footing, because the Chief Promoter is intimately connected with the affairs of the Society before and after the registration. He could also be mainly responsible for making efforts to get licence and for moving the State and Central Governments. In view of part played by the Chief Promoter in such matter, the practice followed by the State Government is required to be maintained in the present case also. In view of this, the learned Advocate-General had contended that Shri Namdeorao s/o Balwantrao Gadekar, Chief Promoter of the factory, though he is not a party to this Petition, shall continue as the Chairman of the Committee of Administrators, pending proper appointment by the Director as per the provisions of bye-law No. 28.

29-A. Alongwith Mr. Namdeorao Balwantrao Gadekar, it was suggested that Mr. Chandrakant s/o Narayanrao Deshmukh and Mr. Sudam s/o Nivruttirao Salunke should also be included as Members of the Board of Administrators, under the Chairmanship of Shri Gadekar. To the name of Shri Sudam Nivrutti Salunke, Shri Talekar has objection, and he contended that for proper working of the Board, instead of Shri Salunke, Damodhar s/o Shankar More, Petitioner No. 8 herein, should be included as Member of the Board of Administrators. We find that the name of Petitioner No. 8 - Mr. Damodhar Shankar More was forwarded by the Chief Promoter to the Chief Minister for inclusion in the Board of Directors. It would be proper for the management of the Karkhana to have Mr. More to be included in place of Mr. Salunke. According to us, therefore, the interim management of the Karkhana, till the properly constituted Board, shall be with the following Committee :

i) Mr. Namderao s/o Balwantrao Gadekar, Chairman

ii) Mr. Chandrakant s/o Narayanrao Deshmukh, and

iii) Mr. Damodhar s/o Shankarrao More.

A fear was expressed by the Petitioners during the course of hearing that their names, to be included as Members of the Board of Directors, will not be favourably considered by the Director or the Government, as they have challenged the second order of the Government even on the grounds of mala fides. Shri Talekar also contended that the entire record was required to be produced before this Court because of the filing of the present Petition by the Petitioners. According to him, the claim will not be considered favourably by the authorities. We hope that the citizens, who approach this Court to agitate their grievances, should not be made to suffer, merely because they have approached this Court. We are sure that the Director of Sugar and the Government will consider the claim of the Petitioners, along with other persons, to be nominated as Members of the Board of Directors. We also hope that the list will be prepared in the interest of the Sugar Factory and its Members only.

With these directions, Rule discharged. No order as to costs.

Shri Talekar prayed for leave to appeal to Supreme Court orally. Leave rejected.