Chandrapur Zilla Sahakari Krushi ... vs State Of Maharashtra And Ors., ...
2003 Latest Caselaw 864 Bom

JUDGMENT

R. J. Kochar, J.

1. Rule. Rule returnable forthwith. Heard finally by consent of parties.

2. Heard Mr. Madkholkar, learned counsel, for the appellant and Mr. Gawai, learned Govt. Pleader, for respondents No. 1 to 3.

3. By these Letters Patent Appeals filed under Clause 15 of Letters Patent, the impugned order dated 16-1-2003 passed by the learned single Judge dismissing the writ petitions filed by the appellants and confirming the order passed by respondent No. 3 directing liquidation of the banks in question by passing interim order under Section 102(1)(c)(iv) of the Maharashtra Co-operative Societies Act, 1960 (for short, 'the Act') is under challenge. In all these appeals, common and identical questions of facts and law are involved and, as such, they are heard together and are being disposed of by this common judgments.

4. The facts of the case are as under : The appellants are the District Level Cooperative Agriculture and Rural Multipurpose Development Bank Ltd. The main aim and object of the said bank is to provide long terms loans to farmers and to adopt and implement farming development policy formulated by the Government. Since long the said bank had been financing to the farmers with the aid of NABARD on furnishing Govt. guarantee and Government's assistance by way of raising funds through Government debentures. It was noticed that since last couple of years, recovery of the bank became unsatisfactory and the bank had gone into huge loss day by day. To overcome this problem, the Govt. had decided to make division of State level bank in 1999. This decision was challenged by the employees Union in the High Court and had obtained stay. Thereafter the employees/Union withdrew the said writ petition and from 1-10-2001 the District Level Banks came into existence.

5. On 26-3-2002, the Bank, NABARD and the Govt. entered into an agreement and according to that agreement the dues payable to NABARD were divided into 15 instalments, of which the first instalment to the tune of Rs. 52.60 crores was payable on 1-7-2002. The first instalment was made available to the bank by way of loan by the Government and remitted NABARD's premium. The Govt. had made this arrangement as it was obligatory on the part of the Govt. to assist the bank as per terms of the aforesaid agreement. The bank's financial condition was very critical. It was the sole duty of the bank to remit the NABARD's loan through recoveries effected by it. On the said issue, all the District Banks were inspected by the Apex Bank and classification was awarded to them as "A", "B" & "C" respectively. The banks which had paid more than 20% of total demand to the Apex Bank were classified in "A" category. The banks which had deposited up to 11 to 19% of total demand were classified in "B" category and all the other Banks depositing less than 11% were classified in "C" category. The Govt. took a policy decision to continue the banks which come under "A" category and those banks were allowed to carry on their business on their own fund by licence from Reserve Bank of India. However, the banks which had fallen in B & C categories were ordered to be liquidated and, therefore, the Competent Authority, i.e. respondent No. 3, had passed the interim order directing liquidation of the banks. This order was impugned before the learned single Judge who by the order dated 16-1-2003 dismissed all the writ petitions. This order of the learned single Judge is under challenge in these Appeals.

6. Mr. Madkholkar, learned counsel, for the appellants contended that the said bank was bifurcated vide order dated 20-9-2001 passed by the Commissioner for Co-operation and for each district the bank was constituted by virtue of an order passed under Section 79A of the passed on 26-3-2002. The impugned order passed by respondent No. 3 directing winding up of the banks is violative of the principles of natural justice. He contended that the decision had already been taken by the Government to wind up the aforesaid banks and thereafter the respondent No. 3 without giving an opportunity of hearing has passed the said interim order Which is not sustainable in law. He further contended that there was no tangible material before him to pass such an order and to form an opinion that the winding up of the banks was necessary. The opinion of the respondent No. 3 is not based on his own assessment and, therefore, the order which is said to have been passed under Section 102(1)(c)(iv) of the Act is in violation of the principles of natural justice. Therefore, the impugned order passed by the learned single Judge is liable to be set aside in support of his submissions, Mr. Madkholkar relied on four decisions of Apex Court in (i) Commissioner of Police, Bombay v. Govardhandas Bhanji, ; (ii) Mahadayal Prem-chandra v. Commercial Tax Officer, ; (iii) The Purtabpore Co. Ltd. v. Cane Commissioner of Bihar and Ors.. ; and (iv) Orient Paper Mills Ltd. v. Union of India .

7. Mr. Gawai, learned Govt. Pleader, contended, that no statutory hearing is provided while passing an interim order under Section 102(c) of the Act and, therefore, the impugned interim order passed by the respondent No. 3 cannot be said to be bad in law. He contended that as per the notification and order issued by the Govt. under Section 79A of the Act on 31-12-1979 a policy decision was taken that the banks would remit 70% of the recovered amount to the apex bank, though the requirement was that 100% of the amount recovered should be deposited with the Apex bank and these directions, in fact, were specifically made for the purpose of registration of District Agricultural and Rural Multipurpose Co-operative Bank. He contended that the remittances were unsatisfactory and, therefore, the apex bank took inspection and classification was awarded to the banks. He farther contended that the respondent No. 3 considered the tangible material before him which showed the performance of the banks which were classified in B and C category and, therefore, he was of the opinion that those banks ought to be wound up and, therefore, by virtue of interim orders directed those banks to be wound up. He contended that in such circumstances, it cannot be said that there is a violation of Section 102(1)(c)(iv) of the Act. Mr. Gawai further contended that the material which was before the respondent No. 3 was sufficient for this subjective satisfaction that the banks had shown popr performance and the remittances to the NABARD were very much poor and hence the respondent No. 3 was perfectly justified in passing the interim order on the grounds mentioned in Section 102(1)(c)(iv) of the Act. He, therefore, contended that the impugned order passed by the learned single Judge upholding the decision of the respondent No. 3 is perfectly legal and valid and no interference into the same is war ranted.

8. We have carefully considered the contentions canvassed by the learned counsel for both the parties. In order to appreciate the contentions of the respective counsel, it is necessary to reproduce Section 102 of the Act.

"102 Winding up -- (1) If the Registrar:

(a) after an inquiry has been held under Section 83 or an inspection has been made under Section 84 or on the report of the auditor auditing the accounts of the society, or

(b) on receipt of an application made upon a resolution carried by three-fourths of the members of a society present at a special general meeting called for the purpose, or

(c) of his own motion, in the case of a society which--

(i) has not commenced working, or (ii) has ceased working, or

(iii) possesses shares or members deposits not exceeding five hundred rupees, or

(iv) has ceased to comply with any conditions as to registration and management in this 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,

(2) A copy of such order made under Sub-section (1) shall be communicated, in the prescribed manner, to the society calling upon it to submit its explanation to the Registrar within a month from the date of the issue of such order, and the Registrar, on giving an opportunity to the society and to the creditors of the society, if any, of being conforming the interim order."

9. The analysis of the aforesaid provision would show that it gives power to the Registrar to pass an order for winding up any Co-operative Society if he forms an opinion that the society should be wound up on the basis of certain facts mentioned in Sub-section (1). Those facts are :

(i) The report of the enquiry held under Section 83 or

(ii) Inspection report of the Inspection held under Section 84

(iii) Report of the Auditor auditing the accounts of the society.

(iv) On the society itself passing a resolution by three-fourth majority of the members present at a special general meeting that the society should be wound up and making an application to the Registrar in that behalf;

(v) The society had not commenced working (after registration).

(vi) The society has ceased to carry on its working.

(vii) The society possesses shares or members deposits not exceeding rupees five hundred.

(viii) The society had failed to comply with the conditions as to registration and management under the Act, the rules and bye-laws.

If on the basis of any of these facts the Registrar feels that the society deserves to be wound up, he can make an interim order for winding up accordingly. Before passing the final order for winding up it is expressly provided that he has to give opportunity to the society by show cause notice why it should not be wound up and after giving a hearing to the society. After hearing the society and considering its contention the Registrar can pass the final winding up order or he may cancel the interim order if he is satisfied that the society does not deserve to be wound up. It would appear that the Registrar is competent after forming his opinion on the basis of Clauses (a) to (c) to pass final order after hearing the concerned society but there is no statutory provision which would require the Registrar to hear the society before passing of an interim order under Section 102(1) of the Act. The word's, "he may issue an interim order" indicates at the first blush that he has a discretion to do so, in contradistinction as regards the final order under Section 102(2) which specifically and expressly casts duty on him to call for explanation from the society as to show cause why the interim order should not be confirmed and to hear the society before his final decision.

10. The learned counsel for the appellants relied on a decision of learned single Judge of Gujarat High Court in Mahasukhlal Nandlal Doshi v. State of Gujarat (1994)2 Guj LR 1595. It has been held in para 15 that, "in the above view of the matter it has to be held that the interim order of winding up of the petitioner-societies made by the third respondent is violative of the principles of natural justice. There is also breach of the statutory provisions of Section 107(3) of the said Act of 1961 inasmuch as the Registrar has to give an opportunity to the petitioner-societies of being heard before making a final order vacating or confirming the interim order". The learned counsel for the appellants also relied on a Division Bench decision of this Court in The Phaltan Sahakari Sakhar Karkhana Ltd. v. State of Maharashtra, through the Secretary, Cooperative and Agricultural Department, Mantralaya, Bombay, 1989 CTJ 27 wherein the ratio was laid down that Sub-section (1) of Section 102 of the Act demands that the Registrar must form an opinion that the society ought to be wound up. It is, therefore, obvious that the Registrar must have relevant material in his hand and should have examined it before forming the opinion. The interim order of liquidation was passed in a casual manner. It is incumbent upon the Registrar to apply mind to the relevant material and to form an independent opinion and the Registrar while exercising statutory powers should not be guided by any letter written by the Director of Sugar to the State Government. Both the interim order and the final order of liquidation were passed in a casual manner and without serious application of mind to the requirement of Section 102 of the Act. In those circumstances, the interim order as well as the final order cannot be sustained.

11. Shri Gawai, the learned Government Pleader, however, contended that the ratio laid down by the Gujarat High Court is not applicable to the facts and circumstances of the present case. In that case the existence of the compulsory necessity of the situation for passing the interim order of winding up of the society was not there. In the present case, the statement showing demand, recovery and remittances for the last three years (July 1999-June 2000, July 2000-June 2001 and July 2001 - June 2002) would show that the remittances to the NABARD by the banks which were put under the categories B & C were very much poor and this has necessitated the winding up of those banks in the larger interest of the farmers, asserts Shri Gawai.

12. In this context the learned Government Pleader submitted that the learned single Judge has rightly followed the decision of the Apex Court in the case of Liberty Oil Mills v. Union of India, . According to the learned single Judge, the ratio laid down by the Apex Court squarely applies to the facts and circumstances of the present case and he has, therefore, concluded that it was not at all necessary for the respondent No. 3 to hear the applicants before passing the interim order directing the liquidation of the banks which have been in category B and C. Shri Gawai took us through the provisions and strenuously urged to support the impugned Judgment of the learned single Judge that in the absence of a specific provision incorporated in Section 102 to hear before passing of an interim order, this Court cannot Import or read the principles of natural justice in the relevant section. He further submitted that the post-decisional hearing provided for in Section 107(2) is in full consonance with the principles of natural Justice and, therefore, according to him, there was no necessity or essential requirement of pre-decisional hearing. Shri Gawai also submitted that the Registrar had acted on the material before him to pass the interim order of winding up of the societies to prevent further loss or damage to the societies.

13. It is undisputed position that the bank's financial condition was critical and the Government had assisted the banks from time to time. It was the sole duty of the banks to remit the loans to the NABARDS through recoveries effected. But on the inspection taken by the apex bank, the classification was awarded to the banks I.e. "A, B & C" respectively. The banks which had paid more than 20% of total demand to the apex bank were classified in "A" category. The banks which deposited 11 to 19% of total demand were classified in "B" category and all other banks depositing less than 11% were classified in "C" category. This classification was based on the figures which were collected for the last three years and the percentage of remittances to the demands were arrived at by taking into consideration the average percentage remittances. In such circumstances, the Registrar on his own came to the conclusion that the banks in the category of B and C were not in a position to show better performance of remittances and passed the impugned order of winding up of these Societies under Section 102(1)(c)(iv) of the Act.

14. The crucial issue before us, how ever, is whether the Registrar can take such a drastic decision, even if termed as interim, without hearing the Societies?

15. We will begin from beginning of the issue under consideration Section 102(1) of the Act provides for issue of "interim order" directing the Society to be wound up. There is no specific provision of opportunity of hearing to be granted to the society before passing of the interim order under Section 102(1) of the Act. Thereafter under Section 102(2), there is a specific provision to hear the Society before passing of the final order, vacating or confirming the interim order. Section 104 provides for appeal against the final order only. There is no provision for appeal against any interim order passed by the Registrar under Section 102(1) of the Act. In effect, it is clear that there is no specific provision of hearing before the interim order and there is no provision for appeal against the interim order. The Registrar is, however, obliged to communicate the interim order to the Society calling upon the Society to explain before the final order would be passed and such final order confirming the interim order is made appealable.

16. It is, therefore, obvious that there is neither pre-decisional hearing before the interim order is passed nor such order is allowed to be appealed against. There is only post-interim decisional hearing before the final order is passed to vacate or confirm the interim order. Section 103 further empowers the Registrar to appoint a Liquidator of the Society, even after the interim order of winding up of the Society. It further mandates that after the interim order is passed the Society shall hand over to the Liquidator the custody and control of all the property, effects and actionable claims to which the Society is entitled and the whole record pertaining to the business of the society and thereafter the Society will have no access to the same. Such is the drastic and draconian provision empowering the Registrar to issue an interim order to the Society to be wound up. There is no appeal also against the interim order. Can it be legitimately inferred that there is no implicit provision of hearing and compliance of the principles of natural justice before passing of such a very harsh and drastic action of ordering the winding up of the very running existing society? The consequence of such an interim order to hand over to the Liquidator virtually the entire Society. Can it be construed that the Legislature intended to put such a draconian power to wind up or wipe out any Society in the hands of a Registrar without hearing before passing an interim order, the consequence and effect of which is not less injurious or harmful than a final order? We do not think so.

17. Though the learned single Judge has purported to draw support from the judgment of the Supreme Court in the case of Liberty Oil Mills (supra), he has missed the following very crucial and important observations in paras 15 and 21. To give in a brief manner the fact situation before the Supreme Court, it can be stated that there were two classes of the aggrieved parties, viz. those who were given Import licences and allotment rights and those who were not actually given such licences and allotment rights but their applications were pending consideration. In the case of the existing licence holders, before cancelling their allotment rights by Interim orders the Supreme Court has held that pre-decisional hearing was essential to comply with the principles of natural justice while in the latter case they should be heard even after the interim orders not to grant them licences. The pertinent observations in paras 15 and 21 are reproduced here :

"It is obviously thought that the right such as it may be, to obtain a licence or allotment of goods having become crystallised into a licence of an allotment, an order under Clause 8-A may have immediate and grave prejudicial repercussions on the person concerned making it desirable that he should be heard before an order of suspension is made. So it is that Clause 8-A contemplates a pre-decisional hearing. On the other hand, licences may not yet have been issued and allotments may yet have to be made. The appropriate authority may be satisfied that it would not be in the public interest to issue licences or make allotments to the person concerned, without ascertaining further details with regard to the allegations against him. In such cases, the authority may make an order of 'abeyance' under Clause 8-B."

"It may be that the opportunity to be heard may not be pre-decisional; it may necessarily have to be post-decisional where the danger to be averted or the act to be prevented is imminent or where the action to be taken can brook no delay. If an area is devastated by flood, one cannot wait to issue show cause notices for requisitioning vehicles to evacuate population. If there is an outbreak of an epidemic, we presume one does not have to issue show cause notices to requisition beds in hospitals, public or private. In such situations, it may be enough to issue post-decisional notices providing for an opportunity. It may not even be necessary in some situations to issue such notices, but it would be sufficient but obligatory to consider any representation that may be made by the aggrieved person and that would satisfy the requirements of procedural fairness and natural Justice. There can be no tape measure of the extent of natural justice. It may and indeed it must vary from statute to statute, situation to situation and case to case. Again, it is necessary to say that pre-decisional natural justice is riot usually contemplated when the decisions taken are of ad interim nature pending investigation or enquiry."

"As we have seen, both Clauses 8-A and 8-B contemplate action of an interim nature pending investigation into allegations under Clause 8. Ordinarily, in the absence of anything more, it would not be necessary to give an opportunity to the person concerned before proceeding to take action under Clause 8-A or Clause 8-B. But while Clause 8-B deals with the right to obtain licences and the right to obtain allotments, Clauses 8-A deals with rights which have flowered into licences and allotments. A person to whom licences have been granted or allotments made may have arranged his affairs on that basis and entered into transactions with others, and, to him the consequences of action under Clause 8-A may be truly disastrous whereas the consequences of action under Clause 8-B may not be so imminently harmful. It is presumably because of this lively difference between Clauses 8-A and 8-B that Clause 10 provides for a pre-decisional opportunity in the case of action under Clause 8-A and does not so provide in the case of action under Clause 8-B."

The issue of pre-decisional hearing has been very neatly and aptly dealt with by a Division Bench of Gauhati High Court (Lahiri & Das, JJ.}. In the case of Deputy Secretary to the Govt. of Assam, Panchayat and Community Dev. Department v. Moving Ch. Pegu, AIR 1983 Gauhati 55. The learned Judges have virtually codified the principles as under. It would be a beacon light for the Courts considering the issue like the one which we are called upon to decide. They have visualised as many as nine contingencies in which pre-hearing can be excluded. (Para 2)

"Natural justice is undoubtedly a brooding omnipresence because of the strides made by the Courts in India during the last two decades but the courts have always struck a balance between the expansion of the Rule and the empirical socio-economic needs, public interest and the authority of the legislature. The never ending process of evolution has taken note of various checks and balances. In administrative law a prima facie right to prior notice and opportunity to be heard may be held to be excluded by implication if any of the following facts is present, singly or in combination with another : (1) Where the functions of the competent authority are held to be non-Judicial; (2) Where the authority in which is vested the power to decide is entrusted with a wide discretion; (3) Where the action taken constitutes denial of a privilege as distinct from interference with a right; (4) Where to impose an obligation to disclose relevant information to the party affected would be prejudicial to the public interest; (5) Where an obligation to give notice and opportunity to be heard would obstruct the taking of prompt action, especially action of a preventive or remedial nature; (6) Where for any other reason it is impracticable to give prior notice or opportunity to be heard; (7) Where appropriate substitutes for prior notice and opportunity to be heard are available; (8) Where legislation expressly requires notice and hearing for certain purposes but imposes no procedural requirement for the purposes; (9) Where the matter in Issue or the monetary value of the interest at stake is too trivial to justify an implication that notice or opportunity to be heard be afforded before action is taken, and (1) Where the power exercised is disciplinary (vide Judicial Review of Administrative Action (4th Edn.) S. A. do Smith pp. 183-194). These are only Illustrative cases. In Wade's Administrative Law, 4th Edition, this aspect has been dealt with at page 451 onwards. Lord Denning M. R. in R, v. Gaming Board for Great Britain. Ex. P. Benaim & Khaida, (1970) 2 QB 417 (430) observed :

"It is not possible to lay down rigid rules as to when the principles of natural justice are to apply : nor as to their scope and extent. Everything depends on the subject matter.".

The application of natural justice rests on statutory implication and, therefore, it must always be in conformity with the scheme of the Act and the subject matter of the case. Urgent actions are needed to be taken to safeguard public health or safety, viz. to seize and destroy obnoxious fish or meat exposed for sale or to order the removal to hospital for a person suffering from infectious disease, in such cases the normal presumption must be that action may be taken without hearing. There are various urgent administrative matters where for obvious reasons no prior hearing can be granted, before taking action. There may be cases where giving of hearing may frustrate the very object of the action. In Pearlberg v. Varty (1972) 1 WLR 534 (540) Lord Hailsham L. C. said in the House of Lords --

"The doctrine of natural justice has come in for increasing consideration in recent years, and the Courts generally, and your Lordships' House in particular, have, 1 think rightly, advanced its frontiers considerably. But at the same time they have taken an increasingly sophisticated view of what it requires in individual cases."

To preserve flexibility the Courts in India, have frequently observed that the requirements of natural justice depend on the circumstances of each case, the nature of the inquiry, the statutory provisions under which the authority is acting, the subject matter to be dealt with. The gamut of statutory and factual context must be considered before applying the rule."

We are of the opinion that the present case can be very safely taken away from the above illustrative contingencies. Ours is a case which practically violates Article 300A of the Constitution of India by taking away the property of the Societies without lending an ear to them! Such exercise of the power certainly cannot and do not exclude the hearing before the drastic action under Section 102(1).

It is, therefore, crystal clear that before passing an interim order affecting the crystallised and vested rights, pre-decisional hearing would be necessary as such orders would have "immediate and grave prejudicial repercussion on the person concerned" and, therefore, it would be desirable to hear him before the order of suspension is passed. It would further reflect the fact situations where pre-decisional hearing could be straightway rule out. The Supreme Court has very pertinently observed that there is "no tape measure" of the extent of natural justice and that it must vary from statute to statute and situation to situation and case to case. There is no straight-jacket formula to be applied. The ratio of the Liberty Oil Mills" case is that the pre-decisional hearing is required if the decision would be of grave prejudicial nature affecting adversely the crystallised rights of a party. In other case, post-decisional hearing would suffice to satisfy the principles of natural justice. In fact, the ratio of this case fortifies our view that Section 102(1) contemplates a predecisional hearing before interim order as the effect of such interim order is of immediate and grave prejudicial nature of virtually threatening extinction of the very Society which is legally functioning. Can we say that the interim order ex parte passed to order to wind up a Society is not truely disastrous and imminently harmful? In our opinion, any interim order to wind up an existing and running establishment or undertaking would amount to sounding a death bell and nothing less. The entire business and the affairs of the Society on the door of which the Registrar would hang an Interim of winding up would come to standstill and complete halt as the consequent steps would be to hand over the Society including its property and the record to a Liquidator. All the business transactions and relations would be snapped by the customers and the depositors/creditors would queue up to knock the doors to demand their deposits and the debts. Every such order would take half of the life out of the Society and even if finally it succeeds in getting the interim order vacated, it would perhaps, be too late for the Society to revive. The interim order would perhaps prove to be its "final terminator". Besides, if the Society can convince the Registrar finally why cannot it do the same exercise at the outset at the time of interim order ? We are, therefore, of the considered opinion that unless there is a danger to be averted or the act to be prevented is imminent or where the action to be taken can brook no delay such as war like conditions or devastating flood or outbreak of an epidemic, a pre-decisional hearing or show cause to the parties would be necessary as is implicit in the provisions of the Act. Under the Act, when the affairs of the Society are subject to full control and supervision of the Authorities and when the accounts are annually audited, It cannot be said that an emergency situation abruptly arose to warrant an action of ex parte interim order to seize and freeze the Society overnight like a surprise raid. The Societies do not become sick overnight though under the constant vigil of the Authorities under the Act. We, therefore, are of the firm opinion that the principles of natural justice cannot be dispensed with for the action under Section 102(1)(c) of the Act. The Registrar is duty bound to grant hearing to the concerned Society against which an interim order of winding up is proposed or contemplated.

18. We fail to understand how the Registrar can act "On his own" unless he puts the material gathered by him to the concerned Society? There is always an otherwise in every matter. All the facts situations prescribed in Section 102(1)(c) from the very nature do warrant hearing the Society before issue of interim order to wind up. In all these eventualities the Registrar must act on very good and tangible material before passing the semi-fatal order of winding up of a society. Under Section 102(1)(a)(b) the Registrar has tangible material collected from the Society itself under an enquiry under Section 83 or Section 84 of the Act. The Society has a full fledge hearing in these enquiries and thereafter the Registrar is justified to act to order winding up by interim order. There is element of surprise or total unawareness of the imminent action likely to be taken by the Registrar. Similar material is expected in the circumstances mentioned under Section 102(1)(C), a suo motu action by the Registrar to wind up the Society by an interim order.

19. We must remember that the Registrar under the Act is the Administrative Head with large judicial and quasi-judicial powers vested in him. The powers conferred on him under Section 102 are akin to the powers of a Court of Law. They have all the semblance and trappings of judicial powers which he must exercise with great care and circumspection. The following observations of the Supreme Court in para 15 in U.T. of Pondicherry v. P. V. Suresh are equally applicable to the Registrar who is exercising the powers of the Judicial nature under Section 102 of the Act.

"Passing of interim orders is not and cannot be a matter of course -- nor a matter of charity. In the matters touching public revenue the courts ought to be more cautious. For better or worse, the courts have come to acquire a veto over the public exchequer. This power should be exercised with good amount of self-reliant and with a sense of responsibility. The power is coupled with accountability to the constitution, to the laws of the land and above all to ourselves. The Court must apply its mind to the facts of the case and must also envisage the implications and consequences of the order it proposes to make. This is so even at the ad interim stage when the respondent is not represented."

We may also draw support from the judgment of our Division Bench (Vyas & Nijjar, JJ.) in the case of Yeshwant Bandhkam Majur Sahakarf Socy. Ltd. v. Assistant Registrar of Co-op. Societies, 1998 (3) All MR 837. In that matter, the Society was not heard at the interim stage, final stage and were in the Appeal. The Division Bench had quashed and set aside all the three orders on the grounds of not hearing the Society and also for want of reasons in the impugned order. The learned Judges have observed in para 4 as under:

"As far as the second limb of his argument is concerned, viz., noxeasons are given in the final liquidation order passed by the respondent No. 1, a bare perusal of the said order is enough to come to the conclusion that Shri Kankaria is also right there. The said final order, except narrating the provisions of the said Act and except saying that the interim order passed on 1st June, 1987 is confirmed, does not give any reasons. Coming to the last order which is challenged in the petition, at the stage of appeal, a report was called for by the Co-operative Officer and that is the report on which reliance was placed by the Appellate Authority. The report discloses that on 7th June, 1987, there were only 8 members of the Society and that new members were accepted only after 28th August, 1987. Thus, for the first time, one finds in the appellate order as to what had probably weighed with the Assistant Registrar, Co-operative Societies. Surely, a party against whom an action is sought to be taken should be given a reasonable opportunity of being heard. Again, surely when an order is passed, the order is required to mention reasons as to why such order is passed. The requirement of reasons is essential and which should disclose that there has been proper application of mind and that neither any extraneous facts are taken into consideration nor any non-germane matter has been considered. Ex facie, all the three orders appear to be illegal and therefore, they are required to be quashed."

We are satisfied that the Registrar was not empowered and justified in passing the impugned interim order ex parte without hearing the Society and without considering the hazardous consequences likely to be caused to the Society leading the Society to further and deeper doldrum. He was also not justified in ordering all the Societies under. B and C categories in one sweep without examining and considering the circumstances and conditions of each of the Societies inr dividually. We arc, therefore, constrained to hold and declare that the impugned interim orders passed by the Registrar to order to wind up the Societies-Banks as illegal, improper and invalid being in contravention of the principles of natural justice which are implicit in the provisions of Section 102 and in particular in Section 102(1)(c) of the Act, The learned single Judge has committed grave error of law in not applying the law laid down by the Supreme Court and in not correctly interpreting the provisions 0f the Section 102 with Sections 103 and 104 of the Act. By his judgment, grave injustice is caused to the Bank-Societies which were virtually put on the death bed and their ill-health got further worsened which resulted in miscarriage of justice as they were subjected to the evil and adverse civil consequences without an opportunity of hearing before the drastic and draconian exercise of the power which ought to have been exercised with great caution. We, therefore, quash and set aside the impugned judgment and order passed by the learned single Judge.

20. We are informed that the Registrar has passed the final orders under Section 102(2) ordering final winding up of the Societies during the intervening period. It is needless to say that the consequences of quashing the interim order would be that the final orders would also fall as held by the Supreme Court in the judgment of Haribhau Dagdu Tandale v. Industrial Co-operative Association Ltd. . The Apex Court in para 14 observed thus :

"The Government while considering the appeal of the first respondent under Section 104 and on coming to know of the developments pending appeal namely the sale of society's land invoked the power under Section 154 to find out the propriety and legality of the sale. It is not the case of the appellant that an appeal lies against the sale by the liquidator. Therefore, the exercise of power by the Government under Section 154 cannot be faulted. Here again there is no substance in the argument of the learned Senior Counsel. The other contention that the interim order merges with final order and therefore, in the absence of any separate appeal against the final order, the appeal against interim order will become infructuous, is also without substance. If the foundation is knocked of, structure standing on it cannot stand in the air, automatically falls down. The interim order is expressly liable to be confirmed or vacated by the authority who passed the interim order. That being the position, the appellate authority who has a right to decide all the correctness of an, interim order cannot be denuded from considering the same on the ground that a final order has been passed pending appeal. The merger theory will not apply to the instant case. Therefore, the High Court was right in rejecting such a contention. The contention based on Section 103(6) also not acceptable as "acts done" contemplated in that section will cover only legally carried out acts and not otherwise. Here the sale by liquidator pending appeal before Government was in contravention of Sections 105 and 106. Hence, no help can be derived from Section 103(6) of the Act."

21. We, therefore, quash and set aside the interim and the final orders passed by the Registrar ordering winding up of the Appellants societies. The Registrar and the liquidator to restore to the Appellants the properties, records and all whatever was taken over under the impugned interim order of the Registrar. The Letter Patent Appeals succeed. The respondent-State shall pay a sum of Rs. 10,000/- per head to each of the appellants.