Jeevan Niwas Co-Operative ... vs State Of Maharashtra Through Govt ...
2016 Latest Caselaw 692 Bom

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                 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    ORDINARY ORIGINAL CIVIL JURISDICTION




                                                                                
                           WRIT PETITION NO. 1953      OF 2007




                                                        
            Jeevan Niwas Co-operative Housing
            Society Ltd. & Anr.                         ..       Petitioners
                  vs.




                                                       
            State of Maharashtra & Ors.                 ..       Respondents


            Mr. Ranjeet Thorat - Senior Advocate with Mr. Kalpesh Nansi, Ms
            Gayatri Sharma, Ms Khushboo Rupani and Ms Khan Farhana for




                                            
            Petitioners.
            Mr. Milind More - Additional Government Pleader for Respondent
                                   
            Nos. 1 and 2.
            Mr. R. V. Govilkar with Ms Ujwala Sawant for Respondent No. 4.
                                  
                                    CORAM : M. S. SONAK, J.

Date of Reserving the Judgment : 02 March 2016 Date of Pronouncing the Judgment : 17 March 2016

JUDGMENT :-

1] The challenge in this petition is to the order dated 19 April

2007 issued by the Deputy Registrar of Co-operative Societies

ordering an inquiry under Section 83 of the Maharashtra Co-

operative Societies Act, 1960 (said Act) into the constitution,

working and financial conditions of the petitioner society.

2] Mr. Thorat, the learned Senior Advocate appearing for the

petitioners has made the following submissions in support of this

petition :

(A) That in the present case, the respondent no. 2 has

purported to exercise powers under Section 83 of the said Act

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and on the basis of application of Mr. Bhupendra Pamnani

(respondent no. 4), about whose membership, there is a

dispute. In any case, the complaint or the application by the

respondent no. 4 does not constitute complaint or application

by '1/5th members of the society' as contemplated by Section

83 of the said Act. Relying upon decision of this Court in the

case of Ashok Saha & Ors. vs. State of Maharashtra &

Ors.1, Mr. Thorat submitted that the inquiry is initiated by the

Registrar on basis of complaint by member, it is necessary

that such complaint must be supported by the requisite

percentage of members. For these reasons, it is submitted

that the impugned order is ultra vires provisions contained in

Section 83 of the said Act;

(B) That the impugned order has been made at the behest

of the respondent no. 4, who is involved in several disputes

and litigations against the society. Accordingly, Mr. Thorat

urged that the impugned order has been made in bad faith;

(C) That there has been no compliance with the provisions

of natural justice and fair play before the impugned order

came to be made. Further, the material on record establishes

that the petitioners have, without prejudice to their rights and

contentions, rectified the so-called defects pointed out by

auditors in the course of audit or re-audit of the petitioner 1 2011 (4) Mh.L.J. 432

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society's accounts. In such circumstances, Mr. Thorat has

contended that there was no material on record for ordering

inquiry under Section 83 of the said Act.

3] Mr. Milind More, the Additional Government Pleader for the

respondent nos. 1 and 2 has submitted that the impugned order is

not made on the basis of complaint by the respondent no. 4, but

rather, the same is made on the basis of audit reports, in which,

objections

of serious nature have been reported. Mr. More

submitted that the respondent no. 2, in terms of Section 83 of the

said Act is vested with powers to order an inquiry even suo motu or

on the basis of special report under 3rd proviso to sub section (5B)

of Section 81. Mr. More submitted that merely because there is

reference to some allegations made by the respondent no. 4 whilst

determining the parameters of the inquiry, the same cannot be

construed as exercise of powers at the behest of or upon the

complaint of the respondent no. 4. Mr. More submitted that in this

case, the respondent no. 2, upon independent application of mind to

the materials on record, which include inter alia the auditors reports

as well as complaints, has suo motu ordered inquiry in terms of

Section 83 of the said Act.

           4]       Mr. More further submitted that at the stage of audit sufficient





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           opportunity was granted to the petitioners.        Further, even upon

receipt of audit reports, the petitioners were granted liberty to make

rectifications or to furnish explanations. The petitioners have in fact

availed of such opportunities. However, since the explanations

furnished by the petitioners were found to be prima facie

unacceptable, the impugned order has been made by exercising

powers under Section 83 of the said Act. Mr. More submitted that in

the course of inquiry, all possible opportunity will be accorded to the

petitioners and therefore, there is no occasion to complain about

non compliance with principles of natural justice at this stage. Mr.

More also submitted that after the inquiry is complete, the result

thereof will be communicated to the petitioners in terms of the

provisions contained in Section 83 (4) of the said Act. If, the report

is adverse to the petitioners, there will be compliance with the

principles of Section 87 of the said Act, before, any orders are made

under Section 88 of the said Act. As against the orders made under

Section 88 of the said Act, the petitioners, will have remedies,

including the remedy of instituting an appeal under Section 152 of

the said Act. For all these reasons, Mr. More submitted that this

petition be dismissed.

5] Mr. Govilkar, the learned counsel for the respondent no. 4,

also submitted that the respondent no. 4 may have only brought to

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the notice of the respondent nos. 1 and 2 certain gross irregularities

committed by the petitioners. However, he submitted that the

impugned orders cannot be said to have been made on the basis of

complaint of the respondent no. 4, but rather, the impugned order is

based upon suo motu exercise of powers by the respondent no. 2

upon examining audit report and other materials on record, which

are more than sufficient to inquire into the situation, working and

financial conditions of the society.

6] Rival contentions now fall for determination.

7] Section 83 of the said Act is contained in Chapter VIII of the

said Act which deals with audit, inquiry, inspection and supervision.

Section 81 provides for audit of the account of the society, at least,

once in each financial year in the manner prescribed. Section 82 of

the said Act provides that if the result of audit held under Section 81

of the said Act discloses any defects in the working of the society,

the society shall within three months from the date of the audit

report, explain to the Registrar the defects, or the irregularities,

pointed out by the auditor and take steps to rectify the defects and

remedy the irregularities and report to the Registrar the action taken

by it thereon and also place the same before the next general body

meeting. The Registrar is also empowered to issue directions to the

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society or its officers to take such action as may be specified in the

order to remedy the defects within the time specified therein. The

consequences of breach of said directions have also been set out

in Section 82 of the said Act.

8] The section 83, with which, we are mainly concerned in this

petition, reads thus :

"83. Inquiry by Registrar (1) The Registrar may suo motu, or ig on the application of the one-fifth members of the society or on the basis of Special Report under the third proviso to sub section (5B) of

section 81, himself or by a person duly authorized by him in writing, in this behalf, shall hold an inquiry into the constitution, working and financial conditions of the society.

(2) Before holding any such inquiry on an application, the

registrar may having regard to the nature of allegations and the inquiry involved, require the applicant to deposit with him such sum of money as he may determine, towards the cost

of the inquiry. If the allegations made in the application are substantially proved at the inquiry, the deposit shall be refunded to the applicant, and the Registrar may under

section 85, after following the procedure laid down in that section, direct from whom and to what extent the cost of the enquiry should be recovered. If it is proved that the allegations were false, vexatious or malicious, the Registrar may likewise direct that such cost shall be recovered from the applicant. Where the result of the inquiry shows that the allegations were not false, vexatious or malicious, but could not be proved, such cost may be borne by the State

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Government.

(3) (a) All officers, members and past members of the

society in respect of which an inquiry is held, and any other person who, in the opinion of the officer holding the enquiry

is in possession of information, books and papers relating to the society, shall furnish such information as in their

possession, and produce all books and papers relating to the society which are in their custody or power, and otherwise give to the officer holding an inquiry all assistance

in connection with the inquiry which they can reasonably give.

(b) If any such person refuses to produce to the Registrar or any person authorized by him under sub-section (1), any

book or papers which it is his duty under clause (a) to produce or to answer any question which put to him by the Registrar or the person authorized by the Registrar in

pursuance of sub-clause (a) the Registrar or the person

authorized by the Registrar may certify the refusal and the Registrar after hearing any statement which may be offered in defence punish the defaulter with a penalty not exceeding

five thousand rupees. Any sum imposed as penalty under this section shall on the application by the Registrar or the person authorized by him to a Magistrate having jurisdiction be recoverable by the Magistrate as if it were a fine imposed

by himself.

(c) The Registrar or the officer authorized by him shall complete the inquiry and submit his report as far as possible within a period of six months and in any case not later than nine months.

(4) The result of any inquiry under this section shall be communicated to the society whose affairs have been

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investigated.

(5) It shall be competent for the Registrar or withdraw any

inquiry from the officer to whom it is entrusted and to hold the inquiry himself or entrust it to any other person as he deems

fit."

9] From the aforesaid, it is quite clear that inquiry can be ordered

by the Registrar under Section 83 of the said Act in the following

three circumstances:

                    (i)      suo motu; or
                                   
                    (ii)     on application of 1/5th members of the society ; or
                                  
                    (iii)    on the basis of special report under the 3 rd proviso to

                    sub section (5B) of Section 81.
        
     



           10]      This Court, in the case of Ashok Saha (supra) has held that

the powers under Section 83, if sought to be exercised on the basis

of complaint of members, cannot be so exercised, unless the

complaint is supported by 1/3rd members of the society. This is

because, at the relevant time, Section 83(1) of the said Act made

reference to 1/3rd of the members of the society. The same section,

in its present form, makes reference to 1/5th members of the society.

The purpose for making such a provision was obviously to insulate

the society from inquiries under Section 83(1) of the said Act on the

basis of complaints by some disgruntled members, lacking support

of even 1/5th members of the society. The purpose was also not to

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obligate the Registrar to order such inquiry under Section 83(1) of

the said Act, merely on basis of complaints of individual member,

unsupported by even 1/5th members of the society. The purpose of

inquiry under Section 83(1) of the said Act is not to enable certain

disgruntled members of the society, incapable of mustering the

support of even 1/5th members of the society to either settle their

personal disputes with the society or to exert pressure upon the

society, with a view to seeking resolution of their pesonal dispute

with the society.

11] The ratio decidendi of the decision of in the case of Ashok

Saha (supra) is that the Registrar is not bound to order inquiry under

Section 83 (1) of the said Act, on the basis of complaint of a

member or some members, who do not constitute requisite

percentage of members as prescribed under Section 83(1) of the

said Act. If however, the complaint or application is made by the

requisite percentage of members of the society, the Registrar is

obligated to order inquiry, subject of course, to fulfillment of other

parameters prescribed under Section 83(1) of the said Act.

12] The decision in the case of Ashok Saha (supra) is however,

not an authority for the proposition that the Registrar lacks

jurisdiction to order an inquiry under Section 83 (1) of the said Act

either suo motu or on the basis of special report under third proviso

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to sub-section (5B) of Section 81, merely because a complaint may

have been made by some member or members, who do not

constitute the requisite percentage as prescribed under Section

83(1) of the said Act. That would not be a correct manner reading

the decision in case of Ashok Saha (supra). It must be noted upon

the authority of decision of the House of Lords in case of Quinn vs.

Leatham2 that a judgment is authority for the proposition, which it

decides and not what can be deduced therefrom. Further, as has

been held in the case of Mittal Engineering Works (P) Ltd. Vs.

Collector of Central Excise, Meerut3, a judgment is not a

precedent on a proposition which it did not decide.

13] Therefore, mere circumstance that a complaint may have

been made by some member or members not constituting the

requisite percentage of members as prescribed under Section 83(1)

of the said Act, does not oust the jurisdiction of the Registrar to

order inquiry under Section 83(1) of the said Act either suo motu or

on the basis of special report under the 3 rd proviso to Section (5B) of

Section 81. Of course, before exercising suo motu powers, there

has to be material on record warranting exercise of such powers.

Further, the Registrar has to genuinely apply his mind to such

material, with a view to form an opinion as to whether inquiry under

2 1901 AC 495 3 1997(1) SCC 203

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Section 83 (1) of the said Act is indeed warranted, in the facts and

circumstances, so presented. If Registrar, virtually abdicates his

powers and discretion to the dictates of some private complainant,

then obviously, exercise of power by the Registrar, will be

unsustainable.

14] Reverting to the facts and circumstances of the present case,

the material on record indicates that the respondent no.2 has

basically made the impugned order, on the basis of audit reports

and the responses furnished by the petitioner society with regard to

prima-facie objections raised in the audit reports. No doubt, the

respondent no.2 has also looked into or adverted to the complaints

made by respondent no.4. This is quite clear from the terms of

inquiry referred to in the impugned order or in the corrigendum

subsequently issued. However, that by itself, is not sufficient to

conclude the respondent no.2 has abdicated his discretion to the

dictates of respondent no.4, at the stage of making of impugned

order. As noted earlier, the emphasis is basically upon the

objections and the irregularities pointed out in the audit reports and

the circumstance that the response of the petitioner society to the

objections raised in audit reports was prima-facie unsatisfactory. In

matters of judicial review of administrative action, adequacy of

material is not usually gone into. So also the defences which the

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petitioner society might have on the merits, in the course of inquiry,

are not to be gone into at this stage. Suffice to record that the

impugned order cannot be said to have been made solely on the

basis of complaint made by respondent no.4, but the same can be

said to be the result of suo motu exercise of powers by the Registrar

on the basis of material before him, in the form of audit reports,

prima-facie, unsatisfactory response by the society coupled with

certain irregularities referred to by the respondent no.4. Accordingly,

it is not possible to accept the petitioner society's contention that the

impugned order is ultra vires Section 83(1) of the said Act.

15] At the stage of making of order under Section 83(1) of the

said Act, it is quite doubtful whether some full fledged opportunity for

showing cause is required to be afforded to the society concerned.

Be that as it may, in the facts and circumstances of the present

case, at least the petitioner society, cannot legitimately make

grievance with regard to any alleged non-compliance with principles

of natural justice and fair play. This is because, the petitioner society

was associated at the stage of audit. Even after the audit reports

were submitted, the petitioner society was afforded opportunity to

rectify defects and to furnish explanation. The petitioner society has

in fact availed of such opportunity. The impugned order has been

made upon record of prima-facie dissatisfaction with the responses

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submitted by the petitioner society. In these circumstances, even

without going into the issue as to whether detailed compliance with

principles of natural justice is contemplated at the stage of making

of order under Section 83(1) of the said Act, suffice to record that

there has been sufficient compliance in the facts and circumstances

of the present case.

16] That apart, in the course of inquiry under Section 83 of the

said Act, the petitioners, are bound to be granted full and effective

opportunity. If the result of the inquiry is adverse to the petitioner

society, obviously, the procedure as provided under Section 87 of

the said Act will be complied with. If the matter, at all, reaches stage

warranting action under Section 88 of the said Act, again, the

petitioners or the members of the managing committee will be

offered full opportunity consistent with principles of natural justice

and fair play. As against any action under Section 88 of the said Act,

there are statutory remedies, in the form of appeals provided under

the said Act.

17] The observations in the impugned order are obviously prima

facie and it will therefore be open to the petitioners to point out in

the course of the inquiry that there are no irregularities in the

constitution, working or financial conditions of the society. At this

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stage, considering the limited scope of judicial review in matters of

this nature, it is not possible to hold that the impugned orders are ex

facie without jurisdiction or that the same are vitiated by bad faith.

This is also not the stage to advert to the adequacy or otherwise of

the material on record or to adjudicate upon the defences on merits

raised by the petitioner in the context of audit objections.

18] Upon cumulative consideration of the aforesaid aspects, this

petition is dismissed. Interim order is vacated. There shall be no

order as to costs.

(M. S. SONAK, J.)

19] At this stage, the learned counsel appearing for the petitioners

prays for continuation of interim relief which was already in

operation for a period of eight weeks. The request is reasonable.

Accordingly, the interim relief already in operation is continued for a

period of eight weeks from today.

(M. S. SONAK, J.) Chandka