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TMI Blog2018 (10) TMI 2040X X X X Extracts X X X X X X X X Extracts X X X X ..... asons: Sub-Section (5) does not refer to Sub-Section (1-A). It only refers to Sub-section (1) and expression any action stipulated therein necessarily has to be in relation to the consequential action of removal of the Committee, which is after the issuance of show cause notice calling upon the noticee to show cause and state its objection, for after all, the Registrar may after affording opportunity, himself come to the conclusion that no action for removal is required to be taken in view of justification, plausible in nature, if any, furnished by the noticee. For formation of opinion in the issuance of notice no prior consultation is required. Otherwise for everything and anything he would have to rush to the bank seeking its opinion, which would not only stifle the power to be exercised by the Registrar but make his authority otiose. Removal of the Committee and the resultant consequential actions are definitely of serious nature. It is in this backdrop, safe guard of Sub-section (5) is prescribed in the Statute. The safe guard is also stipulated considering the disqualification which a Member entails by virtue of Sub-Section (6) of the very same Section, in the event of his rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated and applied for taking decision on the action so initiated. Whether the action of the respondents contradicts the Supreme Court's mandate in State of Madhya Pradesh v. Sanjay Nagayach others [ 2015 (8) TMI 1109 - SUPREME COURT ]? - HELD THAT:- Much emphasis is laid on Sanjay Nagayach. Having carefully gone through the said report, we are not in agreement with the submissions made by the learned counsel for the petitioner, for the ratio of law laid down therein is not only distinguishable but totally inapplicable to the instant facts. There the Court was dealing with a case where the alleged acts of malfeasance and misfeasance were not that of the persons in control of the affairs, but their predecessor-in-interest. Also for a period of 2 1/2 years, no action on the show cause notice was taken and suddenly, one fine day, without consultation of the concerned financial institution, the appropriate authority superseded the Board by appointing an Administrator. It is in this backdrop that the order of the authority was found to be ultra vires the provisions of the Statute, for there was no consultation prior to supersession which is not so done in the instant case. Hence the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and the principles of natural justice. The present petition, being devoid of any merit, is dismissed. - SANJAY KAROL AND SANDEEP SHARMA, JJ. For the Appellant : Ajay Sharma, Advocate For the Respondent : Ashok Sharma, Advocate General, Ajay Vaidya, Senior Additional Advocate General, J.K. Verma, Adarsh Sharma, Rita Goswami and Nand Lal Thakur, Additional Advocate Generals JUDGMENT SANJAY KAROL, J. 1. In the present petition, following important issues arise for consideration:- (a) As to whether issuance of notice under Sub-section (1) of Section 37 of the Himachal Pradesh Co-operative Societies Act, 1968 (hereinafter referred to as the Act), requires consultation in terms of Sub-Section (5) of the very same Section? (b) As to whether provisions of Sub-Section (1-A) of Section 37 is independent of and not subject to Sub-Section (1) of the very same Section? (c) As to whether after formation of opinion and issuance of notice calling upon the noticee to show cause as to why no adverse action be taken, is it open for the Registrar to take action for suspension of the noticee and make arrangements for proper management of the affairs of the Society? (d) As to whether action of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ization of power, respondent No. 2 has placed a democratically elected Board under suspension. Impugned notice stands issued without prior consultation as required under Sub-Section (5) of Section 37 of the Act. In any event, action, motivated in nature, is with the object of stifling democratically elected institutions and stop their functioning. The action is ex facie contrary to the principles of law laid down in Sanjay Nagayach (supra). In any event, malafides stand demonstrated by the selective nature of action, for Government officers nominated on the Board of the Bank are allowed to function. 4. It is with these pleadings, petitioner lays challenge to the show cause notice dated 19.07.2018 (Annexure P-5) with a further direction that the fresh election programme for constitution of a Board so notified vide order dated 26.09.2018 (Annexure P-6) be quashed and set aside and that petitioner be allowed to complete his full tenure, including the period for which the Board was kept under suspension, continuously with effect from 06.04.2018. 5. In response, respondents have filed their affidavit explaining the background in which the Registrar initiated action by issuing notice dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd relied upon the following decisions: Mukesh Kumar Agrawal v. State of Uttar Pradesh others (Two Judges), (2009) 13 SCC 693; Smt. S.R. Venkataraman v. Union of India another (Two Judges), (1979) 2 SCC 491; Ravi Yashwant Bhoir v. District Co lector, Raigad others (Two Judges), (2012) 4 SCC 407; State of Uttar Pradesh v. Brahm Datt Sharma another (Two Judges), (1987) 2 SCC 179; Union of India another v. Vicco Laboratories (Two Judges), (2007) 13 SCC 270; Special Director another v. Mohd. Ghulam Ghouse another (Two Judges), (2004) 3 SCC 440; Union of India another v. Kunisetty Satyanarayana (Two Judges), (2006) 12 SCC 28; M/s. Girdhari Lal sons v. Balbir Nath Mathur others (Two Judges), (1986) 2 SCC 237; T.M.A Pai Foundation others v. State of Karnataka others (Eleven Judges), (2002) 8 SCC 481; Shadi Singh v. Rakha (Two Judges), (1992) 3 SCC 55; Bhatia International v. Bulk Trading S.A. another (Three Judges), (2002) 4 SCC 105; Sanjay Nagayach (Two Judges) (supra); Sam Built Well Private Limited v. Deepak Builders others (Two Judges), (2018) 2 SCC 176; Reliance Airport Developers (P) Ltd. v. Airports Authority of India others (Two Judges), (2006) 10 SCC 1; Commercial Tax Officer ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count which they ought to have taken into account, the court to which an appeal lies can and ought to adjudicate on the matter. 7. The principle which is applicable in such cases has thus been stated by Lord Esher M. R. in The Queen on the Prosecution of Richard Westbrook v. The Vestry of St. Pancras, (1890) 24 QBD 371 at p. 375:- If people who have to exercise a public duty by exercising their discretion take into account matters which the Courts consider not to be proper for the guidance of their discretion, then in the eye of the law they have not exercised their discretion. This view has been followed in Sedler v. Sheffield Corporation, (1924) 1 Ch 483. 8. We are in agreement with this view. It is equally true that there will be an error of fact when a public body is prompted by a mistaken belief in the existence of a non-existing act or circumstance. This is so clearly unreasonable that what is done under such a mistaken belief might almost be said to have been done in bad faith; and in actual experience, and as things go, these may well be said to run into one another. 9. The influence of extraneous matters will be undoubted where the authority making the order has admitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 2 SCC 521; Union of India thr. Govt. of Pondicherry Anr. v. V. Ramakrishnan Ors., 2005 8 SCC 394; and Kalabharati Advertising v. Hemant Vimalnath Narichania Ors., (2010) 9 SCC 437). 14. Having noticed the aforesaid principles we observe that to begin with there is no foundation of malice of fact laid down in the petition. Change of the guard of the political executive took place not in April, 2018, but in December, 2017. That apart, there is nothing on record to even remotely demonstrate/suggest that the authority issuing the notice was directly or indirectly under the influence of the political executive. Such person is not impleaded as a party. Also there is nothing on record indicating that respondent No. 2 had any personal malice against the petitioner. As such, we are not in agreement with the submissions made on behalf of the petitioner that the action is either politically motivated or is based on extraneous factors/considerations or out of malice. 15. We may notice that the impugned action stands taken against 16 persons all of whom were functioning as Members of the Board of respondent No. 3-Bank and only one of them has assailed the same. Well, it is a mere statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- (a) Violating exposure norms prescribed for financing to individuals and units vide circular No. NB.DOS.CMA/768/A-75/2008-09 dated 12th May, 2008 (Inspection Reports of 2015, 2016 and 2017); (b) sanctioning of big loans to individuals in violation of the CMA norms, fixed by the Reserve Bank of India (Inspection Reports of 2015, 2016 and 2017); (c) exceeding the prescribed ceiling for financing under Housing Loan sector and bringing the House Loans within the specified ceiling fixed by the RBI vide circular No. RPCD.CO.RCBD.BC. No. 48/03.03.01/2010-11 : dated 20.01.2011 (Inspection Reports of 2015, 2016 and 2017); (d) failing to take action and adequate steps for the recoveries of money involved in fraud and review of such cases (Inspection Reports of 2015, 2016 and 2017); (e) granting commercial loans for real estate in violation of RBI guidelines contained in circular No. RPCD/109/07.38.01/2008-09 : dated 25-05-2009 (Inspection Report of 2015, 2016 and 2017); and (f) formulating wrong policies for NPA management resulting into increase in NPA during the last three years. 19. That the action is not motivated, much less on account of political reasons, we notice, is evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety, he may suspend such committee or member, as the case may be, and where the committee is suspended, make such arrangements as he think proper for the management of the affairs of the society till the proceedings are completed: Provided that if the committee or member so suspended is not remove, it or he shall be reinstated and the period of suspension shall count towards its or his term; ... ... ... (2) ... ... ... (3) ... ...... (4) ... ...... (5) Before taking any action under sub-section(1) in respect of a Co-operative society, the Registrar shall consult the financing institution to which it is indebted. (6) A member who is removed under sub-section (1) may be disqualified for being elected to any committee for such period not exceeding three years as the Registrar may fix and the said period shall commence after the expiry of the term of the committees from which he is removed. ... ... ... 67. Inquiry by the Registrar:- (1) The Registrar may, of his own motion, by himself or by a person authorized by him, by order in writing, hold an enquiry into the constitution, working and financial condition of a society. (2) An inquiry of the nature referred to in subsection (1) sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory and its infraction renders the action or order illegal. (4 When the opinion or advice or view does not bind the person or authority, any action or decision taken contrary to the advice is not illegal, nor becomes void. (5 When the object of the consultation is only to apprise of the proposed action and when the opinion or advice is not binding on the authorities or person and is not bound to be accepted, the prior consultation is only directory. The authority proposing to take action should make known the general scheme or outlines of the actions proposed to be taken be put to notice of the authority or the persons to be consulted; have the views or objections, take them into consideration, and thereafter, the authority or person would be entitled or has/have authority to pass appropriate orders or take decision thereon. In such circumstances it amounts to an action after consultation . (6 No hard and fast rule could be laid, no useful purpose would be served by formulating words or definitions nor would it be appropriate to lay down the manner in which consultation must take place. It is for the court to determine in each case in the light of its facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e guard is also stipulated considering the disqualification which a Member entails by virtue of Sub-Section (6) of the very same Section, in the event of his removal. 28. The view we take is fortified by law. The principles of interpretation of a statute are now well settled. A statute is an edit of the Legislature {Vishnu Pratap Sugar Works (Private) Ltd. v. Chief Inspector of Stamp, U.P., AIR 1968 SC 102 (Three Judges)}, and the conventional way of interpreting or construing a statute is to seek the 'intention' of its maker {RMD Chamarbaugwala v. Union of India, AIR 1957 SC 628 (Five Judges)}. 29. The Court has to look essentially to the words of the statute to discern the 'referent' aiding their effort as much as possible to the context. 30. The legal maxim mens or sententia legis {Abhiram Singh v. C.D. Commachen (Dead) by Legal Representatives others, (2017) 2 SCC 629 (Seven Judges)}, and Generalia specialia non derogant {General Things do not derogate from special things, OSBORNS Law Dictionary}, are well settled. 31. It is also settled principle of law that the statute must be read as a whole and one provision of the Act should be construed with respect to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation (supra)}. 37. The Apex Court in Bhatia International (supra), has observed as under: 15. ............................... The conventional way of interpreting a statute is to seek the intention of its makers. If a statutory provision is open to more than one interpretation then the Court has to choose that interpretation which represents the true intention of the legislature. This task often is not an easy one and several difficulties arise on account of variety of reasons, but at the same, it must be borne in mind that it is impossible even for the most imaginative legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. It is in such a situation the Courts' duty to expound arises with a caution that the Court should not try to legislate. While examining a particular provision of a statute to find out whether the jurisdiction of a Court is ousted or not, the principle of universal application is that ordinarily the jurisdiction may not be ousted unless the very statutory provision explicitly indicates or even by inferential conclusion the Court arrives at the same when such a concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls Ltd., (AIR 1961 SC 1549}. 38. Repetitive though it may appear, but as already noticed, we reiterate that Sub-Section (1) of Section 37 provides for (a) formation of an opinion in the issuance of show cause notice; and (b) passing a written order in removing the Committee. It is only when the Registrar deems it appropriate to remove the Committee, in our considered view, he has to necessarily consult the Financial Institution to which a Cooperative Society is indebted. In any event, no prior consultation stipulated under Sub-Section (5) is required for initiating action under Sub-Section (1-A) of such Section. Question No. (a) is answered accordingly. 39. The next issue, which arises for consideration, is as to whether Sub-Section (1-A) is subject to completion of all the actions stipulated under Sub-Section (1) or not? 40. The language of Sub-Section (1-A) is plain, simple and unambiguously clear. It uses the expression while proceeding to take action under Sub-Section (1) the Registrar is of the opinion that suspension of the Committee or any Member is necessary and in the interest of Society, he may take action of suspending the Committee or such Member and thereafter make pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f proceedings is exercisable when proceedings for supersession have commenced. Section 35 (1) of the Act shows that when the Registrar is of opinion that the committee of a co-operative society makes default or is negligent in the performance of duties or is otherwise not functioning properly the Registrar may supersede the committee of management and has to give an opportunity to the society to be heard in that behalf. The Registrar has also to obtain the opinion of the general body of the society. Therefore, the opinion of the Registrar is to be followed by some definite act which will commence the proceedings for supersession. The provisions in the Act indicate that some definite step like the issue of a notice must be taken under the provisions of Section 35 (1) of the Act with a view to show that proceedings for supersession of the committee are set in motion. 14. It is therefore manifest that power exercisable under S. 35 (2) of the Act is confined to the time during the period of supersession proceedings. Unless the proceedings have started as indicated earlier the Registrar cannot call in aid the power exercisable under Section 35 (2) of the Act. 15. The second question whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board by appointing an Administrator. It is in this backdrop that the order of the authority was found to be ultra vires the provisions of the Statute, for there was no consultation prior to supersession which is not so done in the instant case. Hence the said decision has no bearing to the instant facts and the impugned action cannot be found to be contrary to the ratio of law laid down therein. Question No. (d) is answered accordingly. 46. This takes us to another issue and that being as to whether the provisions of Section 37 are subject to Section 67 or not? In our considered view inquiry contemplated under Section 37 is totally different and distinct than the one contemplated under Section 67, both with regard to its object, scope and purpose. Inquiry under the latter is with regard to the constitution, working and financial condition of the Society to be initiated as per procedure prescribed therein, suo motu by the Registrar himself or through an authorized person on the asking of the Society and/or its Members. This is unlike the inquiry contemplated under the former section, where the Registrar himself, after forming an opinion after issuing show cause notice has to pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 37 is quasi judicial in nature, whereas the same cannot be said with regard to the provisions contemplated in Section 67 of the Act. Whereas Section 37 confers upon the Registrar an affirmative power of superseding the committee, Section 67 only confers upon the Registrar the duty to hold an inquiry and thereafter submit the report in the mode and manner, as envisaged in Subsection (4) thereof. The purpose of incorporating Section 37 in the Act is totally different from the intent behind Section 67. There is neither any conflict in the Scheme of the Statute nor it can be said that the powers and duties conferred upon the Registrar under Sections 37 and 67, respectively either overlap each other or outreach the intent of each other. Question No. (e) is answered accordingly. 48. The action cannot be said to be violative of the Statute, equity or fair play only for the reason that no action, similar in nature stands taken against the Government Officers/nominees placed on the Board. Such representation by nomination can always be recalled/changed by the Government. Similarly, it cannot be argued that in the absence of any action taken against the entire Committee, the impugned actio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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