Ranjit Singh vs Registrar, Co-op.Societies, Haryana .

S.S. Kang, J.

Whether a member of the Managing Committee of a Central Cooperative Society ceases to be a member in the event of the Primary Cooperative Society, which he represents on the Managing Committee of the Central Society, becomes a defaulter and incurs a disqualification under Rule 26 of the Punjab Cooperative Societies Rules, 1963 (hereinafter referred to as `the Rules''), framed under Section 85 of the Punjab Cooperative Societies Act, 1961 (hereinafter referred to as `the Punjab Act''), is the short but interesting question raised in this bunch of three writ petitions (C.W.P. Nos. 5226, 5326, 5324 and 5692 of 1985).

To begin with the factual matrix :

The petitioners in the three writ petitions are members of three different Primary Cooperative Societies, which are in turn members of the Karnal Central Cooperative Bank Ltd., Karnal (hereinafter called `the Bank''), a Central Cooperative Society. Under the provisions of the Haryana Cooperative Societies Act, 1984 (for short `the Haryana Act''), the Cooperative Societies, Central Societies and Apex Societies. Membership of the Primary Societies is confined to the individuals. The primary object of setting up the Apex Societies is the promotion of the objects the Punjab and Haryana Acts by providing all facilities qua the operation of its member Cooperative Societies and those of Central Societies, to facilitate the working of other Cooperative Societies, which are its members.

In 1983, the three petitioners were elected representatives of their respective societies to represent them in the Bank. They were thereafter elected members of the Bank by the general house. Under Section 20 of the Haryana Act, every memberCooperative Society has one vote in the affairs of the Society, provided that member in default of any sum due from him to the Society shall not be eligible to exercise his right of vote. There is an explanation to this clause, which postulates that the expression `member'' in this clause does not include a society. The result is that a Cooperative Society, which is a member of another cooperative society, is entitled to exercise its right of vote in the affairs of that society notwithstanding its being in default for any sum due to that society. However, individual members of a Primary Society, who are in default of any sum due to the Primary Society, are not eligible to exercise their right of vote.

The Registrar, Cooperative Societies, Haryana, issued instructions on August 1, 1985, explaining the legal position. It was stated therein that under rule 26 of the Rules, the Registrar is competent to remove a member of the Managing Committee of a Society when such a member ceases to be a member.

Cessation is not automatic. The powers of the Registrar under Rule 26 stand conferred on all the Deputy Registrars, Cooperative Societies vide Haryana Government Notification No.S.O.33/P.A.25/61/S.3/78 dated March 3, 1978. An individual or a Society (through its representative) will cease to be a member of the Managing Committee in the circumstances enumerated in Rule 26 ibid. It was advised that necessary action be taken against the members of the Managing Committees whose Societies had become defaulters.

The Deputy Registrar, Cooperative Societies, Karnal, issued notices to some of the members of the Managing Committee of the Bank, including the three petitioners for showing cause as to why their membership from the Board of Directors of the Bank should not be ceased under Rule 26(f) read with rule 25(a) of the Rules because the Primary Societies, which they were representing in the Bank, were defaulters to the Bank. The petitioners sent their replies to the show cause notices explaining the position.The petitioners contended inter alia that the Deputy Registrar had no jurisdiction to take action against the petitioners. He was himself a Member of the Board of Directors along with the petitioners and was not competent to decide about the eligibility of other Directors to sit on the Board. His action tantamounts to be a Judge in his own cause. The petitioners themselves were not defaulters of any Cooperative Society. They had not incurred any personal disqualification. The Primary Societies were not members of the Managing Committee and their being defaulters would not disqualify their representative, i.e., the petitioners to serve on the Board of Directors. It was also averred that no rules had been framed under the Haryana Act disqualifying the members of the Committee. So the action was wholly without jurisdiction. The pleas of the petitioners did not find favour with the Deputy Registrar. He passed order dated October 11, 1985, ceasing the petitioners as Directors of the Bank. He held that the Punjab Cooperative Societies Rules, 1963, were applicable, and that the Primary Societies, which were representated by the petitioners, had incurred a disqualification under Rule 26 of the Rules. The petitioners impugn these orders.

It has been contended by the learned counsel for the petitioners that Section 2(d) of the Haryana Act takes the Primary Societies out of the purview of Rule 26(a). They have been made eligible to vote in the affairs of the Central Society in spite of there being any sums due from them to the Central Society. The representatives of such Societies are entitled to participate in the elections of the members of the Managing Committee of the Central Society by casting their vote of contesting election of the Managing Committee. The right to vote has concomitant right to stand in the election, the defaults of a Primary Society does not visit its representative to the Central Society with any adverse consequences like cessation. Under Rule 26, only a person who is a member of the Committee and who continues to be in default in respect of any sum due from him to the Cooperative Society shall cease to hold his office as such. Since the Primary Society being a juristic person and only natural persons can be members of the Managing Committee of the Central Society, provisions of clause (a) of Rule 26 are not attracted. They are applicable to the members of the Managing Committees of the Primary Societies only. Byelaw 34 of the Bank also supports this contention. Only natural persons who are members of the Managing Committee can incur the disqualifications including cessation under these provisions, Rule 26 runs counter to Section 20(d) and is ultra vires thereof.

The Deputy Registrar is a Member of the Managing Committee, as a nominee of the Government. He could not become a Judge in his own cause and could not determine the disqualifications of his CoDirectors. The powers under Rule 26 can be exercised by the Registrar, and not the Deputy Registrar. The Deputy Registrars had not been invested with the power, authority, or jurisdiction to pass the impugned orders ceasing the petitioners as Directors. It was also contended that the provisions of Rule 26 ibid are attracted only in those cases in which the disqualifications are incurred by the Members of the Managing Committee after their election thereto. The Primary Societies of the petitioners were defaulters to the Bank when the petitioners were elected as their representatives. They had not become defaulters after their election as Directors.

In order to appreciate the contentions raised it will be appropriate to read the statutory provisions so far as they have a bearing on the controversy :

"Section 20. Vote of Members. Every member of a cooperative society shall have one vote in affairs of the society :

Provided that (a) to (c) ... ... ...

(d) a member in default of any sum due from him to the society shall not be eligible to exercise his right of vote".

Explanation. For the purpose of this clause, the expression `member'' does not include a society.

(e) a society brought under the process of winding up or in liquidation shall not be eligible to exercise its right of vote".

"Rule 26. Cessation of Membership of Committee [Section 85(x)]. A member of the Committee shall cease to hold his office as such if he :

(a) continues to be in default in respect of any sum due from him to the Co operative Society for such period as may be laid down in byelaws;

(b) ceases to be a member;

(c) is declared insolvent;

(d) becomes of unsound mind;

(e) is convicted of an offence involving dishonesty or moral turpitude; or

(f) becomes subject to any disqualification which would have prevented him from seeking election, had he incurred that disqualification before election."

Section 20 confers on every member of a Cooperative Society one vote in the affairs of the Society, however, under clause (d) of Section 20 a member who is in default of any sum due from him to the Society shall not be eligible to exercise the right to vote. By an explanation added to this clause a Society had been excluded from the definition of `member''. Resultantly even though a Primary Society which is a member of central Society is a defaulter thereto it shall remain entitled to vote in affairs of the Central Society. Individual member of a Primary Cooperative Society, who is a member of a Central or Apex Society exercises that right as a duly elected representative.

Right to vote is not synonymous with the right to seek election. Both the rights are civil rights. They flow from specific statutes. A particular statute may confer on a person a right to vote. It may also confer a right to vote and a right to seek election. There is no dichotomy between the two. Even in another statute, qualifications for voting and qualifications for seeking election can be different and diverse. Under the Representation of People Act, every Indian citizen who is 21 years of age and possesses the other qualifications prescribed by law and who does not suffer the disqualifications enumerated in the various statutes is entitled to be elected. But no elector, who is not 25 years of age, is eligible to seek election to the Legislative Assembly of a State. So the qualifications for seeking election and for being a voter are different. Same is the position with the Member of the Rajya Sabha. A candidate who seeks election to Rajya Sabha has to be a voter and has to be of 30 years of age. Section 20(d) of Haryana Act has only overlooked a disqualification incurred by a Primary Society by being in default to the Central Bank for a limited purpose. It has been allowed to vote in the affairs of the Central Society, its default notwithstanding. But it does not follow that by this concession the Society or its representative has also acquired an indefeasible right to seek election to the Managing Committee of the Society.

It was sought to be argued that under Section 20 of the Haryana Act, every `Member of a Cooperative Society shall have one vote in the affairs of the Society''. The Legislature wanted that the Primary Societies should participate in the affairs of the Central Society of which they are members despite a default attaching to them. This participation in the affairs of the Central Society includes participation in the election to the Managing Committee of that Society which in turn means being elected as a Member of the Managing Committee of the Central Cooperative Society. This argument has not impressed us. A Primary Society is entitled to participate in the affairs of Central Society through its representative. So it means that it can, through its representative, attend the meeting of the general body and cast vote in the election of the Members of the Managing Committee. However, the language in Section 20 is not so susceptible to the interpretation sought to be canvassed by the petitioners viz. that the representative of such a Primary Society shall be entitled to contest for membership of the Managing Committee despite its being in default to the Central Society. The reason for introducing Explanation to clause (d) of Section 20 of the Haryana Act was that large number of Primary Cooperative Societies in the State of Haryana were defaulters and under Section 20 as it stood then, they were not eligible to cast their votes in the affairs of the Central Society. It resulted in the Central Societies being robbed of their democratic and representative character. Very few Societies, which were not defaulters, were able to send their representatives to the General House. It did not reflect the popular will. For that reason, a concession was granted to the Primary Cooperative Societies by enabling them to send their representatives to the General House of the Central Societies, even if the Primary Societies were in default. It, however, did not mean that the representatives of these defaulting Societies were entitled to seek election and become Members of the Managing Committees of the Central Societies. The Central Societies are financial institutions which finance numerous Societies and have to deal with large amounts of cash. The turnover of some of the Central Societies runs into crores of rupees. Only persons with immaculate credentials can be allowed to be members of the Managing Committees of such Societies so that they can act in a responsible fashion and look after the interests of these Societies. Persons who represent Societies which are not steeped into the Cooperative spirit of Societies, which are not financially well off and are not in a position to effectively and properly discipline their members and thus became defaulters in the payment of their dues to the Central Society, cannot be permitted to become Members of the Managing Committees of the Central Societies. Voting in the affairs of the Central Society does not necessarily imply the right to participate in the affairs of the Managing Committee also.

It was strenuously contended that the rulemaking authority, while prescribing disqualifications for membership of the Managing Committee and cessation of membership of those Committees, advisedly used clear and unambiguous languages in rules 25 and 26 of the Rules. Rule 26 postulates that a Member of the Committee shall cease to hold his office as such if he continues to be in default in respect of any sum due from him to the Cooperative Society. It is manifest from the above expression that it is the member of the Managing Committee who ceases to hold office if he continues to be in default. The Primary Society is only juristic person. It is not a natural person. It cannot be a Member of the Committee of the Central Society. So, if the Primary Society is in default, that disqualification cannot visit its representative . He may be the best cooperator in the State and there may be certain black sheep in the Primary Society, who, by their default, may make their Society also a defaulter. For the fault of those individuals, the Central Society should not be deprived of the services of an active and genuine cooperator. In this context, our attention was drawn to rule 23 of the Rules and rules 2 and 3 of Appendix `C'' to these Rules. Rule 2 of Appendix `C'' is the definition clause. It defines a candidate to mean a voter, who files his nomination papers to seek election. Voter means a person who is either a shareholder or an authorised representative of a member Co operative Society duly qualified to participate in the election and includes a delegate of a Cooperative Society elected or selected in accordance with the proviso to Section 23 of the Act. Rule 3 of Appendix `C'', so far it is relevant for our purpose, is reproduced below :

"3. Preparation of list of zones and voters. (1) Notwithstanding anything contained in the byelaws of a cooperative society, every society shall, within a period of sixty days from the date of constitution of its managing committee or the appointment of Administrator, appoint a representative, by passing a resolution to that effect to participate in the election of the managing committee of a cooperative society and its general body meeting of which it is a member. The society shall send the name and address of the representative along with a certified copy of the resolution duly attested by an officer not below the rank of an Inspector, Cooperative Societies, incharge of the cooperative society :

Provided that the said period of sixty days shall commence, in case of the committees which are already in existence, from the date of coming into force of the Punjab Cooperative Societies (Haryana First Amendment) Rules, 1981.

(2) The resolution under subrule (1) shall not be revoked during the tenure of a committee or an Administrator, as the case may be, except in case of cessation of the representative on account of his death or otherwise, in which case another representative shall be appointed in the manner specified in subrule (1), within a period of sixty days from the date of such cessation . ... ...".

These rules in no manner support the contention of the petitioners.

It is true that the provisions of rules 25 and 26 incorporate disqualifications and provide for ceasing elected members from holding office. These provisions have to be strictly construed. Even then the construction put on these rules has to be in consonance with the objects of the Act i.e. promotion of the cooperative movement in the State. This object can be achieved if the Cooperative Societies are broadbased, their benefits reach the remotest corner of the State and the humblest of citizen. For that purpose, the Societies have to be managed and run on business principles of efficient management. Only those members can be allowed to work on the Managing Committees of the Cooperative Societies who have the cooperative principles of thrift and cooperation dear to the heart. This should be manifested by their active participation in the affairs of their Societies and the latter complying with the provisions of the Act and the byelaws. They should be quick and punctual in repayment of their loans. Those members who are defaulters are a liability for the whole movement. They cannot be allowed to participate in the management of the Societies. The provisions of rules 25 and 26 have to be interpreted in this background. Under the Haryana Act, only primary Societies can be members of the Central and Apex Societies. Byelaws of the respondentBank also show that ten members of the Managing Committee (Board of Directors) have to be elected out of the representative of the Primary Cooperative Societies. There may be a Central or Apex Society which does not have even a single individual member. Rules 25 and 26 apply to those Societies as well. They also apply to primary Societies which have only individual as members. So, out of the various disqualifications enumerated in rules 25 and 26, some apply to individuals who are members of the Managing Committee of the Societies as representatives of the individuals and there are some which apply to the members of the Committees who represent individual members as also Primary Societies. If the narrow construction is put on the language of rules 25 and 26, then no representative of the Primary Societies can be disqualified from seeking election or be deemed to have ceased to hold office even if the Primary Societies to whom they represent may have incurred all the disqualifications provided by the Act. Surely, this could not be the intention. The object of the Act can be achieved only if the expression `member of the Committee'' in rule 26 be read mean the Primary Society and not its representative. It is not necessary to dilate on the matter any further as the matter is not res integra. In Thakur Janak Singh v. The State of Punjab and others, 1974 PLJ 119, it was observed :

"The delegate or representative has no independent existence and he only represents the Society which is the real member of the Committee and if the Society suffers from a disqualification, its representative cannot be eligible for election. It is not correct to say that what has to be judged or taken into consideration is the personal qualifications or disqualifications. It was further explained :

"The word `person'' in Rule 25 of the Punjab Cooperative Societies Rules, would include a registered cooperative society. The use of the word `he'', `his and `him'' would not imply that a natural human being is alone under contemplation and these words cannot apply to a society who would be a person within the contemplation of the statute."

This view was affirmed by a Division Bench of this Court in Ajaib Singh v. Shri Kishan Saroop, the Deputy Registrar, Cooperative Societies, Karnal and others, 1980 PLJ 275 : 1985 R.R.R. 135. It was held :

"In this petition under Articles 226/227 of the Constitution of India, order of the Returning Officer dated April 2, 1980, rejecting the nomination paper of the petitioner, is sought to be quashed. After hearing the learned counsel for the parties, we find that the impugned order is without jurisdiction. Admittedly, Zone No. 9 is a Zone where the Societies have to elect their representatives. The nomination paper of an individual who represents a particular Society cannot be rejected on the ground that the said individual was not an active member. The relevant point would be whether the society, who is the voter, is an active member or not. The individual only represents the Society. In this view of the matter, the order of the Returning Officer is without jurisdiction and the same is hereby quashed."

The same view was taken by D.S. Tewatia, J. in Kuldeep Singh v. The State of Haryana and others, 1981 PLJ 398. He followed Ajaib Singh''s case (supra) and further observed :

"The ratio of Division Bench decision in Ajaib Singh''s case (supra) leaves no scope for any doubt in so far as the personal disqualification of the member is concerned. He may suffer personal disqualification on one count or he may suffer personal disqualification on ten counts, his personal disqualification cannot be taken into consideration as it is only the disqualification of the Society that he represents which can be taken into account."

The learned counsel for the petitioners have not been able to bring to our notice any decision of this Court or the final Court where a contrary view may have been taken. We are in respectful agreement with the views expressed in the above decisions.

Rule 26 does not run counter to the provisions of Section 20(d) of Haryana Act. They provide for two different situations. Section 20 lays down that every member of the Cooperative Society shall have one vote in the affairs of the Society. In clause (d) an exception is carved and a defaultermember has been made ineligible to exercise his right of vote. By Explanation to this clause, Primary Societies have been exempted from the rigour of clause (d), they have been given the right to vote even if they are defaulters. Rule 26, on the other hand, has provided for cessation of membership of the Managing Committee. It has enumerated the contingencies on the happening of which a member of the Managing Committee of the Society ceases to hold office. There is no hiatus between the two provisions. Learned counsel for the petitioners have not been able to show us in what manner they run counter to Section 20.

The argument that the Deputy Registrar was incompetent to pass orders of cessation because by doing so he was acting as a Judge in his own cause is perhaps based on some misconception. The orders of cessation have been passed by the Deputy Registrar acting as a Registrar as such and not as a Director of the Board of Directors of the Bank. He had no personal interest in the matter. That was no cause in which he was a party. No fault can be found with the procedure adopted.

We do not find any merit in the plea that the Deputy Registrar was not authorised to pass orders of cessation under rule 26. The petitioners themselves have appended a copy of notification dated March 3, 1978, (Annexure P.3) and August 30, 1985 (Annexure P.1) in C.W.P. No.5324 of 1985, whereby the Governor of Haryana in exercise of powers conferred on him by subsection (3) of Section 3 of the Punjab Cooperative Societies Act, 1961, had conferred all the powers of the Registrar of the Cooperative Societies exercisable under the said Act and the rules made thereunder on the Additional Registrars, Joint Registrars, and Deputy Registrars of the Cooperative Societies, within their respective areas of Registrar, including the powers of ordering cessation under Rule 26 have been conferred, among others, on the Deputy Registrars. This notification has not been superseded by notification dated August 30, 1985. It is not mentioned therein that the previous notifications have been superseded. Annexure P.4 was issued because the previous notifications did not confer any powers on the Cane Commissioner. Managing Director, Haryana State Federation of Cooperative Sugar Mills Limited, Managing Director, Haryana Dairy Development Cooperative Federation Limited, Institutional Development Officer/Director (Procurement and Input) Haryana Dairy Development Cooperative Federation Ltd.) and Project Officer/Chief Executive Officer, Haryana Dairy Development Cooperative Federation Ltd. under any provision of the Haryana Act. Since the Government waited to invest these officers also with the powers of the Registrar in relation to certain statutory provisions, it became imperative to issue afresh notification and thus the notification dated August 30, 1985, was issued. The learned counsel for the petitioner wanted to buttress their contention that the Deputy Registrars have no powers to pass orders of cessation under Rule 26 ibid by referring to two Division Bench decisions of this Court in Lakha Singh v. Registrar Cooperative Societies, Punjab, 1972 PLJ 363, andSewa Singh v. The State of Punjab, 1973 PLJ 744,wherein it has been held that the orders of cessation of a member of the Managing Committee could be passed only by the Registrar and the Assistant Registrars were not invested with such powers. In the absence of any authority having been conferred on the Assistant Registrars, the orders of cessation passed by them were without jurisdiction. We had sent for the records of these two writ petitions and a perusal thereof reveals that both the cases related to the State of Punjab and no notification like Annexure P.3 which had been issued authorising the Deputy Registrars to exercise the powers of the Registrar, including those under Rule 26 had been issued in Punjab. In the notification which was the subjectmatter of those writ petitions, the Assistant Registrars were invested with limited powers under section 27 of the Act only and that too in respect of Primary Societies only. But in the present case, notification Annexure P.3 has specifically authorised the Deputy Registrars of all the powers of the Registrar, which includes the power to pass orders of cessation under Rule 26. So these cases are of little help to the petitioners.

Lastly, it was contended that the petitionerSocieties were defaulters when they had elected their representatives. If anybody was dissatisfied, his only remedy was to claim a reference under section 55 of the Punjab Act, to challenge the election of the petitioners. No action could be taken against the petitioners under Rule 26. Reliance has been placed on Balbir Singh v. The Deputy Registrar, Cooperative Societies, Sangrur and others, 1979 PLJ 555 : 1984 R.R.R. 296.

Action has been taken against the petitioners under clause (a) of rule 26. This provision takes notice of a continuous default. It is not the case of the petitioners that their Societies were not defaulters when the impugned action was taken against them. The Societies were defaulters before the petitioners'' election. That default continued. When a Society commits defaults, the interest continues to accrue on the principal. Every year, the figure of default goes on changing with the addition of interest. The default is continuous and every year its complexion changes. So, the action has not been taken against the petitioners for a default which the Society had committed before their election. Rather the action can be taken under rule 26(a) only if the member continues to be in default for such period as may be laid down in the byelaws. Under the byelaws of the Bank this default has been quantified. The observations in Balbir Singh''s case (supra) were made in its factual context. Clause (a) of rule 26 did not fall for construction in that case. The allegations in that case were that the member of the Committee had incurred the disqualification under rule 26 (f). So the whole controversy centred around clause (f) of Rule 26 and inR that context these general observations were made that Rule 26 does not take note of disqualifications which were there at the time of election and not of post election disqualification. They do not cover cases under clause (a) of rule 26.

For the foregoing reasons, we find no merit in these writ petitions and dismiss the same, but with no order as to costs.