The Goa State Co-Operative Bank ... vs Union Of India (Uoi), Through The ...
2005 Latest Caselaw 677 Bom

JUDGMENT

S.S. Parkar, J.

1. Leave to amend the prayer Clause 'A' to substitute Bye-law No. '35(11)' instead of 35(iii)'. granted.

2. This petition is filed, challenging the letter dated 18.5.2005 issued by the Director of Co-operation and the notice dated 23.5.2005 (Exhibit 'E') issued by the Registrar of Co-operative Societies, Goa convening special meeting of the Board of Directors on 31/05/2005, on the requisition made by 9 members of the Board of Directors of the Goa State Co-operative Bank Ltd. Panaji which is a multi-state co-operative Bank. The Goa State Co-operative Bank Ltd.. Panaji, Goa is constituted under the provisions of the Multi-State Co-operative Societies Act. The total number of members of the Board of Directors is 21, out of whom 16 members are elected members. Nine elected members of the Board of Directors have made representation dated 29th April, 2005 to the Central Registrar, Co-operative Societies. New Delhi, requesting him to convene a special meeting of the Board of Directors for considering motion of no confidence against the chairman and vice-chairman of the Bank i.e. the petitioners No. 2 and 3 on the grounds of inefficiency, non-co-operation with other members, harassment to staff and corruption. The said action was sought to be taken by virtue of Bye-law No. 35(iii) and (iv) of the Bye-laws of the Bank. Pursuant to the said representation, the Chief Director (Cooperation) i.e. the Central Registrar of Co-operative Societies, New Delhi by letter dated 18.5.2005 wrote to the Registrar of Co-operative Societies, Government of Goa requesting him to convene a special meeting of the Board of Directors of the Bank for considering the motion of no-confidence Accordingly, notice dated 23.5.2005 was issued by the Registrar, Co-operative Societies, Goa convening the special meeting of the Board of Directors on 31st May, 2005 at 11 a.m., authorising Mr. A.V.C. Mohenkar, Asst. Registrar. Co-op. Societies & Chief Executive Officer of the Goa Rajya Sahakari Sangh Maryadit, Panaji to preside over the said meeting and submit report on the outcome of the meeting, It is this notice which is under challenge in this writ petition, filed by the Bank as petitioner No. 1 and Chairman and Vice-Chairman of the said Bank as petitioners No. 2 and 3 respectively.

3. The notice convening the special meeting of the board of directors is challenged essentially on three grounds. Firstly, it is challenged contending that the provisions of Byelaw No. 35(iii) are ultra vires and inconsistent with the provisions of the Multi-State Co-op. Societies Act, 2002 (hereinafter, referred to as "the Act" for short). Secondly, it is challenged on the ground that the notice was issued convening the special meeting not within seven days from the date of receipt of the requisition as provided by Bye-law No. 35(v) of the Bye-laws. And lastly it is argued that the power having been given to the Central Registrar, the meeting could not have been convened by the State Registrar as there is no provision for delegation of the power under the Bye-laws

4. It may be mentioned that after filing of the petition, pursuant to the ad interim stay granted by this Court on 25th May, 2005 in terms of prayer Clause (C), which was continued thereafter, the special meeting of the Board of Directors has not been held so far.

5. Since the Counsel representing the parties have been heard at length, we propose to dispose of this petition at the admission stage itself.

6. In so far as the first contention raised in the petition is concerned, it was contended that since neither the Act, nor the Rules provide for removal of the Chairman and the Vice-Chairman, the Bye-laws cannot provide for removal of the Chairman and the Vice-Chairman. That is how it is argued that the Bye-laws are ultra vires the Act and the Rules. Section 10(1) provides that every multi-state cooperative Society may make its bye-laws consistent with the provisions, of the Act and the Rules made thereunder. Sub-section (2) of the said Section gives a list of matters in respect of which the Society can, inter alia. make bye-laws. The Sub-section (2) opens with the words "In particular, and without prejudice to the generality of the foregoing power", which would mean that the list given in Sub-section (2) is not exhaustive, but only enumerative. Moreover, the wording of the Sub-section (2) indicates that Society is not even bound to provide on all the items included in that list but may make bye-laws only on some of the items enlisted therein. Wording of Section 10, therefore, leaves us in no manner of doubt that the bye-laws can provide for not only on the matters enumerated in Sub-section (2) of Section 10, but on other matters as well. What is required is that the provisions of bye-laws should not be, in any way, inconsistent with the provisions of the Act and the Rules framed thereunder. In our view, the Bye-laws cannot be said to be inconsistent with the Act or Rules merely for the absence of provision in the latter as argued. On the contrary, the object or purpose of making bye-laws is to provide for the matters in respect of which no provision is made either in the Act or in the Rules.

7. Mr. Nadkarni argued that since the Act does not expressly provide for making of buy-laws as regards the removal of Chairman and the Vice-Chairman, though it provides for the election of Chairman and the Vice-Chairman, without providing how they could be removed, the bye-laws for removal of the Chairman and the Vice-Chairman by no confidence motion against them are inconsistent with the provisions of the Act and the Rules made thereunder and, therefore, ultra vires the same. In support of this contention, he relies on the Schedule annexed to the Rules. Under item No. 7 in the Schedule there is provision for election of office bearers, including that of the Chairman and the Vice-Chairman who can be elected, but not about their removal. We do not think that if the Rules do not provide for removal of the Chairman and Vice-Chairman, the bye-laws cannot provide for it. In this connection, reference may be made to Section 16 of the General Clauses Act, 1897, which provides that a power to make the appointment shall also have power to suspend or dismiss any person appointed. Significantly, Section 10 of the Act gives power to the Society to make bye-laws and does not restrict the Society as to the items on which the provisions can be made in the bye-laws as pointed out hereinabove.

8. The next argument of Mr. Nadkarni that since item (v) of Sub-section (2) of Section 10 of the Act provides for procedure for removal of the members of the board and for filling up their vacancies, if the legislature had intended the Society to make bye-laws as regards removal of Chairman and Vice-Chairman also it would have been so specified, does not appeal to us. As stated earlier, the list is only enumerative and not exhaustive and since the power to appoint includes the power to remove, mere omission cannot be said to be deliberate or intentional with a view to negate or deny such power which is always necessary. In that case, the Chairman and the Vice-Chairman can get away with any misconduct and the Board will have to tolerate them for the entire period of their tenure.

9. Argument is also advanced that the meeting of board under the Rules has to be convened by the Chief Executive under Section 50 of the Act and, therefore, the provision, under the bye-laws empowering the Central Registrar to convene the meeting of the Board of Directors is inconsistent with the Rules. We do not think that convening meeting of the board of directors on the requisition of 1/3 members can be said to be inconsistent with Section 50 of the Act. After all, the Chief Executive is a full-time employee of the Society as stated in Section 50 of the Act and he is empowered to convene meeting of the board of directors at the instance of the Chairperson. On the other hand, the Central Registrar is empowered under the bye-laws to convene a special board meeting on the requisition of the members for the purpose of considering the no-confidence motion against the chairman and vice-chairman. Such meeting may not be convened and stalled by the Chairman by not issuing the direction to the Chief Executive to convene such meeting. The two provisions, therefore, cannot be said to be inconsistent.

10. Argument is also advanced by Mr. Nadkarni, Counsel for the petitioner that since the Act and the Rules framed thereunder do not make provision nor provide for making a provision about removal of the Chairman and the Vice-Chairman, the absence of such provision in the Act and the Rules would mean that the legislature had intended not to make provision for the removal of the Chairman and the Vice-Chairman in order to have stability in the multi-state cooperative Society. We do not think that by not making such provision in the Act the legislature wanted to provide stability. As pointed out earlier, Section 16 of the General Clauses Act, provides that power to appoint includes power to remove. Moreover, no restriction is imposed by the Act or the Rules for not providing for the removal of the Chairman and the Vice-Chairman of the Society. The argument that no provision was made for removal of Chairman and Vice-Chairman in the Act in order to give stability to the functioning of the Society, does not appeal to us, because the stability of the Society cannot be achieved at the altar of continued misconduct, mismanagement, corruption or malfunctioning of the Chairman or Vice-Chairman. Even the argument that since the bye-laws do not provide for the circumstances in which no confidence motion can be moved against the Chairman or Vice-Chairman, it would enable certain members to move such resolution and the majority of the members could remove the chairman or vice-chairman for no reason, is without any substance because such move or no confidence motion may be open to challenge by filing the dispute under Section 84 of the Act. In this case, the requisition itself mentions why no confidence is sought to be moved against the chairman and the vice-chairman. The allegations against them are of inefficiency, non-co-operation with other members of the Board of Directors, harassment to the staff and corruption.

11. The decision of this Court in the case of Hindurao Balwant Patil and Anr. v. Shri Krishnarao Parshuram Patil and Ors., , relied upon by Mr. Nadkarni does not support his contention. In that case, there was no provision in the bye-laws for removal of the Chairman by passing no confidence motion against the Chairman. In paragraph 8 of the Judgment, following observations have been made :

"The legislature has not chosen to make any provision for passing a vote of no-confidence against the Chairman and the Vice-Chairman either in the Act or in the rules. Such a provision could have been made by the society by framing necessary bye-laws. But in the present case such a provision is not made or to be precise, though suggested the said proposal was turned down by the Registrar by a specific order."

(Emphasis supplied)

The above observations, on the contrary, negate the contention of Mr. Nadkarni inasmuch as though neither the Act nor the Rules had made provision for passing a vote of no-confidence against the Chairman or Vice-Chairman in that case, the Bench held such a provision could have been made by the Society by framing necessary bye-laws. In that case, the proposal for such provision was turned down by the Registrar by a specific order. In the present case, undoubtedly, such provision has been made in the bye-laws which were registered with the Registrar. Section 6(3) of the Act provides that the application for registration shall be accompanied by four copies of the proposed bye-laws of the Society and accordingly, the present bye-laws must have been registered under the said provision. We, therefore, find no substance in the above contention raised on behalf of the petitioners also.

12. Strangely, this petition is filed not only by the Chairman and Vice-Chairman of the Society who are aggrieved parties, but the Bank is also impleaded as Petitioner No. 1. The Bank, instead of taking steps for amendment of the bye-laws as per the provisions of Section 11 of the Act is itself made petitioner No. l, obviously at the instance of the Chairman and the Vice-Chairman, i.e. petitioners No. 2 and 3, who are challenging the vires of the bye-laws which were registered along with the registration of the Bank itself with the Registrar of Societies under the provisions of the Act.

13. The next contention of the petitioners is that the notice was not issued by the Registrar strictly in accordance with the Bye-law No. 35(v) which requires the Registrar to convene the special meeting of the Board of Directors within 7 days from the date of receipt of the requisition under sub-Clause (iv). The requisitions were moved on 29.4.2005 which were signed by 9 members of the Board of Directors against the Chairman and the Vice-Chairman separately. They were addressed to the Central Registrar of Co-op. Societies, New Delhi, as defined under Bye-law No. 1(vi). It is not in dispute that the said requisition was received by the Central Registrar on 3.5.2005. Since by virtue of Power vested under Section 4(2) of the Act, the Central Government had delegated the powers of the Central Registrar to the State Registrar of Co-operative Societies by issuing Notification dated 16.9.95, as amended by Notification dated 14.8.1989 under the corresponding provisions of the Act of 1984, the Central Registrar (Chief Director, (Cooperation)), forwarded the requisition to the State Registrar by letter dated 18.5.2005, with a request to convene the special meeting of the board of directors of the Bank for considering the motion of no-confidence. That letter was received by the State Registrar on 20.5.2005 as per paragraph 12 of the reply affidavit of respondent No. 8 dated 9th June, 2005 which is not disputed. Thereafter, the State Registrar issued Notice dated 23.5.2005 giving directions to convene the meeting on 31st May, 2005, which is under challenge in this petition. The State Registrar has, in fact, moved in the matter within seven days from the date of receipt of the letter of the Central Registrar on 20.5.2005 for convening the special meeting of the Board of Directors.

14. On behalf of the petitioners it is argued that a copy of the requisition submitted to the Central Registrar was also served on the State Registrar, which seems to have been received by the State Registrar on 5.5.2005 and, therefore, State Registrar could have acted within seven days from 5.5.2005 if the power was already delegated to him by the aforesaid Notification. But the requisition, as required under the bye-laws having been addressed to the Central Registrar, we cannot find fault with the State Registrar for not acting on the basis of the copy served on him until the requisition was forwarded to him by the Central Registrar by letter dated 18.5.2005. Having delegated the power to the State Registrar by General Notification, the Central Registrar cannot be said to have ceased to possess the power originally vested in him.

15. The next argument advanced on behalf of the petitioner is that there was no delegation of power by virtue of Section 4 of the new Act. Firstly, the saving provision under Sub-section (4) of Section 126 of the new Act does continue the validity of the Notification dated 16.9.19S5 as amended on 14th August, 1989. On behalf of the respondents, reliance is also placed on Section 24 of the General Clauses Act. However, in our opinion, in view of the express saving provision under Section 126 of the Act of 2002, there is no need to resort to similar provision in the General Clauses Act. Mr. Nadkarni, however, argued that in view of the two notifications issued by the Central Government, after the enactment of the present Act of 2002, the earlier notifications would not be operative. He relies firstly on the Notification dated 20/1/2004, annexed as Exhibit R-1 to the affidavit dated 9.6.2005 filed by respondent No. 8. That notification was issued under Section 4(2) of the Act with regard to the powers exercisable by the Central Registrar under Sections 43 and 45(6) of the Act only. Secondly he has produced a notification dated 24th February, 2003 issued by the Ministry of Agriculture under Section 4(2) of the present Act with regard to the powers which are exercisable by the Central Registrar under Section 84 of the Act only. Referring to these two notifications he argued that the Central Government itself does not consider that the earlier Notifications issued under the Act of 1984 are still in operation and, therefore, issued the aforesaid two notifications under the new Act.

16. We do not agree with this contention. Simply because by way of abundant caution or otherwise the Central Government chooses to issue the Notification in respect of certain matters, it will not affect the validity of the earlier notifications unless there is inconsistency. Even if the Central Government had issued above notifications under the impression or being of the opinion that the earlier notifications have lapsed, they do not cease to be in operation in view of Section 126(4) which expressly provides that the earlier notifications issued under the provisions of the old Act shall be deemed to have been respectively made, issued, and instituted under the new Act in so far as they are not inconsistent with the provisions of the new Act. Thus, if new notifications issued. by the Central Government under the provisions of the new Act are not inconsistent with the notifications issued under the earlier Act, the latter shall continue to be in operation. We are, therefore of the view that this contention, raised on behalf of the petitioners is also not sustainable in law.

17. On behalf of the respondents, it is argued that the provision for exercise of power by the Registrar within 7 days of the requisition made by the members for convening a special meeting of the Board of Directors for deciding no-confidence motion against the Chairman and the Vice-Chairman, is made for the benefit of the requisitionists and, therefore, if at all, the grievance could be made by the requisitionists, if there is delay, but the petitioners cannot take advantage of that. Besides that, in our opinion, mere use of the word ' shall' cannot make the provision mandatory so that non-compliance thereof would render the action illegal. Whether the word 'shall' is used in the mandatory sense or not depends on the circumstances and the context of the provision. There are many cases where the word 'shall' has been judicially interpreted by the Apex Court to be directory and the word 'may' has been held to be mandatory, depending upon the context and the object of the provision. In our view, compliance within 7 days required under bye-law No. 35(v) is directory in nature and not meant to be mandatory in the sense that the action taken after 7 days would become illegal. Moreover, we do not think that factually there is any delay on the part of the Registrar in convening the meeting on the requisitions made by the members of the Board of Directors, beyond the period prescribed under Bye-law 35 (v) as pointed out above.

18. The reliance by Mr. Nadkarni, on the Judgment of the Division Bench of this Court in the case of Dinkarrao (ABA) Krishnaji Patil v. State of Maharashtra and Ors., 1997 (3) MLJ. 129 is of no assistance to the petitioners. What was held to be mandatory in that Judgment by the Division Bench of this Court is not about convening meeting within 7 days prescribed under the Bye-laws of the Society, but the Bench held that when the notice was issued, it was mandatory that the notice should be accompanied along with the documents as mentioned in Rule 57-A (1) of the Rules framed under the Maharashtra Co-operative Societies Act, 1960. Thus, service of accompaniments along with the prescribed notice was held to be mandatory and not service of notice within seven days as such.

19. In view of the above, we find no substance in the petition. In case, ultimately motion of con-confidence is passed in the meeting against the Chairman and the Vice-Chairman, the rejection of this petition cannot stand as a bar against the petitioners No. 2 and 3 for resorting to any other remedy that may be available to them under the Act.

20. In the result, the petition is rejected and the interim order passed by this Court initially on 25th May, 2005 and continued thereafter by our Order dated 7th June, 2005, is vacated. The meeting which was convened for 31st May, 2005 shall be now held on 24th June, 2005 at 11.00 a.m. at the venue mentioned in the Notice dated 23rd May, 2005. All the parties waive notice of the meeting.