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Issues Involved:
1. Legality of the order passed under Section 78 of the Maharashtra Co-operative Societies Act. 2. Allegations of mala fide exercise of power. 3. Consultation with the federal society. 4. Adequacy of the appellate order. 5. Specific charges against the board of directors. Issue-Wise Detailed Analysis: 1. Legality of the Order Passed Under Section 78 of the Maharashtra Co-operative Societies Act: The petitioners challenged the orders issued by the Joint Director (Sugar) and Joint Registrar of Co-operative Societies, Maharashtra State, under Section 78 of the Act, which removed the board of directors and appointed an administrator. The court observed that Section 78 contemplates an extreme and drastic step, intended to protect the interest of the society or the community at large. The court noted that the action contemplated by Section 78 is not only drastic but is extreme and abnormal in nature, and must be taken only when necessary to protect the society's interest. 2. Allegations of Mala Fide Exercise of Power: The petitioners alleged that the orders were politically motivated and influenced by local Congress (I) MLAs and workers. They claimed that malicious efforts were made to disrupt the smooth functioning of the karkhana. The court noted that specific allegations of mala fides were made in the petition and were not denied by the respondents. The court found that the action seemed to have been taken for totally irrelevant and extraneous purposes, indicating a mala fide exercise of power. 3. Consultation with the Federal Society: The petitioners contended that the federal society was not consulted as required by Section 78 of the Act. The court referred to the observations of the Madhya Pradesh High Court in Radheshyam Sharma v. Govt. of M.P., which emphasized that consultation should be full and effective, not merely a formality. The court noted that the proper course would have been to send all relevant material to the federal society to enable it to tender advice. However, the court did not delve further into this issue, as it was not necessary for the decision. 4. Adequacy of the Appellate Order: The petitioners argued that the appellate order was not a speaking order and lacked proper reasoning. The court agreed, noting that an appeal under Section 152 of the Act requires a reasoned order. The court observed that the appellate authority had disposed of the appeal mechanically without addressing the substantial questions of fact raised by the petitioners. The court emphasized the importance of recording reasons in support of quasi-judicial orders, as reiterated by the Supreme Court in Simens Engineering and Manufacturing Committee v. Union of India. 5. Specific Charges Against the Board of Directors: The court examined the specific charges against the board of directors: - Charge 1 (Less Crushing of Sugarcane): The court found a genuine and bona fide difference of opinion between the authorities and the board of directors regarding the action against defaulting members. - Charge 2 (Recovery of Amount): This charge was given up and did not form part of the final order. - Charge 3 (Increasing Producer Members): The court noted that membership should be left to the society and found the charge based on an honest and bona fide difference of opinion. - Charge 4 (Rectification of Audit Objections): The court excluded this charge from consideration, as the petitioners had no opportunity to meet the allegations based on the audit report received after the show cause notice. - Charge 5 (Sanctioning Expenditure): The court found that the expenditure was sanctioned by the board, and the managing director's failure to place monthly statements before the board did not justify action against the entire board. - Charge 6 (Advances to Contractors): The court found that the advances were made in good faith and for the benefit of the society, and there were no bye-laws or directions limiting such advances. - Charge 7 (Advances to Employees): The court noted that the advances were repaid, and the society was not put to any financial loss. - Charge 8 (Appointment of Employees): The court found that no new employees were appointed, and the existing employees were confirmed as permanent, which was within the board's powers. - Charge 9 (Construction of Earthen Bridge): The court found that the construction was necessary and beneficial for the society, and the expenditure was duly certified. The court concluded that none of the charges were serious enough to warrant action under Section 78 of the Act. The court quashed the orders passed by the respondent No. 1 and confirmed in appeal by respondent No. 2, and directed the administrator to restore the control and management of the karkhana to the board of directors. The court also refused the respondents' request for leave to appeal to the Supreme Court and for a stay of the order.
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