2020 (8) TMI 854 - HC - Indian Laws

Interim order for Liquidation - it is the case of the respondents that the impugned order has been passed under section 102(1)(c)(ii) and (iv) of the Maharashtra Co-operative Societies Act, 1960, it may not be necessary to delve into the circumstances covered by clauses (a) and (b) - order for winding up of the petitioner society was passed - HELD THAT - What section 102(1)(c) contemplates is that if the Registrar of his own motion in the case of a society which has not commenced working or has ceased working or possesses shares or members' deposits not exceeding five hundred rupees or has ceased to comply with any conditions as to registration and management as provided in the Act or the rules or the bye-laws, is of the opinion that a society ought to be wound up, he may issue an 'interim order' directing it to be wound up. Adverting specifically to the facts of the present case where respondent No. 1 has invoked clause (c)(ii) and (iv) of sub-section (1) of section 102, what therefore falls for consideration is that the Registrar must suo motu form an opinion that a society should be wound up because it has ceased working or it has ceased to comply with any conditions as to registration and management as provided under the Act or the rules and bye-laws framed thereunder then he may issue an 'interim order' directing the society to be wound up. The show cause notice was issued on 19.05.2020 to which petitioner submitted reply on 15.06.2020. Immediately on the next day, i.e., on 16.06.2020, the impugned order was passed. Impugned order says that though the petitioner had submitted its reply, no documents were annexed with it. It is stated that though reference was made to an affidavit regarding payment of dues to the workmen, neither copy of such affidavit nor any other evidence were produced. Regarding agreement entered into with Amul, again it is stated that no evidence to that effect was produced. On that basis, it was held that the written reply was not at all satisfactory and that liquidation process should be initiated. Having regard to the stand taken by the petitioner society in its show cause reply, if respondent No. 1 wanted or desired further materials to be considered in support of the contentions, it could have very well sought for the same from the petitioner society. After all directing liquidation of a society is a drastic measure and ordinarily should be taken only as the last option. Non-seeking of materials/evidence from the petitioner society more so in the context of the petitioner society seeking a hearing does not appear to be justified; rather it appears that impugned action has been taken in undue haste without calling for and examining the related materials. When an order is set aside by a superior authority, the consequence thereof is that it becomes inoperative; it is rendered null and void; it is erased from the record book as if it was never passed - to contend that the impugned order dated 16.06.2020 is a continuation of the previous proceeding which led to passing of final order dated 24.08.2016 is clearly an untenable proposition and certainly does not stand to reason. When respondent No. 1 says that the terms and conditions of the appellate order dated 12.05.2017 have not been complied with and for that reason he seeks to invoke the suo motu jurisdiction under section 102(1)(c), he has firstly to clearly state and point out as to what are the non-compliances and to what extent. The impugned order dated 16.06.2020 passed by respondent No. 1 cannot be sustained being wholly untenable in law as well as on facts - petition allowed.

Summary

Issues Involved:
1. Legality of the interim order for liquidation.
2. Compliance with the principles of natural justice.
3. Validity of the grounds for liquidation.
4. Continuation of previous proceedings.

Detailed Analysis:

1. Legality of the Interim Order for Liquidation:
The petitioner sought the quashing of the interim order dated 16.06.2020 by the Divisional Joint Registrar of Co-operative Societies (Dairy), Pune, which directed the liquidation of the petitioner society under section 102(1)(c)(ii) and (iv) of the Maharashtra Co-operative Societies Act, 1960. The Registrar also appointed a liquidator under section 103(1) of the Act. The petitioner argued that the impugned order was ex-facie illegal as none of the conditions under section 102(1)(c)(ii) and (iv) were infringed, and it was passed for extraneous reasons, including political motivations.

2. Compliance with the Principles of Natural Justice:
The petitioner contended that the impugned order was passed in breach of the principles of natural justice. Despite submitting a reply to the show cause notice, the petitioner was not granted a personal hearing. The court examined section 102 of the Act, which allows the Registrar to issue an interim order for winding up a society without pre-decisional notice or hearing. However, the court referred to the precedent set in Chandrapur Zilla Sahakari Krushi and Gramin Bahuudeshiya Development Bank Limited Vs. State of Maharashtra, where it was held that principles of natural justice are implicit and must be read into section 102(1)(c). The court agreed that a pre-decisional hearing is necessary due to the adverse civil consequences of such an order.

3. Validity of the Grounds for Liquidation:
The respondents argued that the action was a continuation of the appellate order dated 12.05.2017, which set aside an earlier liquidation order subject to certain conditions. The petitioner claimed compliance with these conditions, including tying up with "Amul" for milk collection. The respondents, however, alleged non-compliance based on a report dated 10.06.2019, which stated that the petitioner society had not started milk collection. The court found that the impugned order was passed in undue haste without seeking further materials from the petitioner to substantiate its claims. The court emphasized that liquidation is a drastic measure and should be taken only as a last resort.

4. Continuation of Previous Proceedings:
The respondents contended that the impugned order was not a fresh case but a continuation of the previous appellate order. The court rejected this argument, stating that once an order is set aside by a superior authority, it becomes inoperative. The court held that the Registrar must clearly state and point out specific non-compliances before invoking suo motu jurisdiction under section 102(1)(c). The court found that the Registrar did not provide specific facts and instances of non-compliance, making the impugned order untenable.

Conclusion:
The court found considerable merit in the writ petition, holding that the impugned order dated 16.06.2020 was untenable in law and on facts. The order was set aside and quashed. The writ petition was allowed with no order as to costs.