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Issues:
1. Liability of directors of a cooperative society for actions related to a private bank before its transfer. 2. Interpretation of Section 63 of the Madhya Bharat Co-operative Societies Act, 1954. 3. Jurisdiction of the Deputy Registrar and the Board of Revenue in imposing liabilities on directors. Detailed Analysis: 1. The petition involved eight directors of a cooperative society formed to take over a private bank. The liquidator sought recovery of funds from the directors, alleging negligence in recovering debts and mismanagement. The Deputy Registrar initially imposed liability on the directors, which was challenged in a writ petition. The Board of Revenue remanded the case to ascertain specific amounts. The petitioners contended that liabilities could only arise post-transfer to the cooperative society, not for actions related to the private bank. 2. The interpretation of Section 63 of the Act was crucial in determining liability. The section allows imposing liabilities on those involved in the organization or management of the society for misapplication of funds or breach of trust. The petitioners argued that their actions post-formation of the cooperative society should be considered for liability, not actions related to the private bank before the transfer. The section outlines specific conditions for ordering repayment or restoration of funds, emphasizing acts concerning the society's property or misfeasance. 3. The Court analyzed the powers of the Registrar under Section 63, emphasizing the need for strict interpretation due to the Registrar's broad authority. The Registrar can order compensation only if the society suffered a loss due to the individual's actions. In this case, the society had no assets of its own, as the private bank was transferred to it. The Court concluded that liabilities could not be imposed on the directors for actions related to the private bank before the transfer, quashing the previous orders and directing the Deputy Registrar to proceed as per the law. In conclusion, the Court held that the orders imposing liability on the directors for actions related to the private bank before its transfer to the cooperative society were without jurisdiction. The case was remanded to the Deputy Registrar for further proceedings in accordance with the Court's interpretation of the law. Each item of liability was to be assessed based on post-transfer actions. The parties were directed to bear their own costs, and the security deposit was to be refunded to the petitioners.
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