Zeeshan Mehdi vs The Union Of India And 4 Ors
2021 Latest Caselaw 2796 Bom

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          Digitally signed   IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Kanchan   by Kanchan V.
V.
          Mayekar
          Date:                   ORDINARY ORIGINAL CIVIL JURISDICTION
Mayekar   2021.02.12
          19:16:50 +0530
                                    WRIT PETITION (L) NO. 4731 OF 2020
                                              ALONGWITH
                                 INTERIM APPLICATION (L) NO. 6750 OF 2020

                      Zeeshan Mehdi                    )
                      Age 50 years, Occupation :       )
                      The Chairman, Bombay Mercantile)
                      Co-operative Bank Ltd., having   )
                      address at 78, Mohammedali Road, )
                      Mumbai - 400 003, Maharashtra )            ..... Applicant/
                                                                     Petitioner
                             VERSUS

                      1. The Union of India,             )
                      Through the Ministry of Agriculture)
                      And Farmers Welfare,               )
                      Dept. of Agriculture, Co-operation )
                      And Farmers Welfare, Krishi Bhavan)
                      New Delhi - 110 001                )

                      2. The Central Registrar Co-op. )
                      Societies, Government of India,     )
                      Ministry of Agriculture and Farmers)
                      Welfare, Dept. of Agriculture,      )
                      Co-operation And Farmers Welfare)
                      Krishi Bhavan, New Delhi - 110 001)
                      Respondent nos. 1 and 2 served      )
                      through The Union of India, office at)
                      Aykar Bhavan, Maharshi Karve Road)
                      Churchgate, Mumbai - 400 021        )

                      3. Bombay Mercantile Co-operative)
                      Bank Ltd.,                      )
                      Through Managing Director,      )
                      78, Mohammedali Road,           )
                      Mumbai - 400 003, Maharashtra )
                      Mumbai                          )

                      4. Mr.Bahar U. Barqi,                  )
                      s/o. Late Shri Iftikhar Uddin          )
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of Alig & Company,                       )
C-4, 2nd Floor, Lajpat Nagar - III,      )
New Delhi 110 024                        )
Email Id :                               )

5. Mr.Ashok Kumar Jain,                  )
Returning Officer,                       )
Bombay Mercantile Co-operative           )
Bank Ltd.,                               )
78, Mohammedali Road,                    )
Mumbai - 400 003, Maharashtra            )      ..... Respondents


Mr.Aspi Chinoy, Senior Advocate, a/w. Mr.Zishan Quazi and Mr.Joel
Carlos for the Petitioner.

Mr.Y.S.Bhate, a/w. Mr.Atul S.Singh for the Respondent Nos. 1 and 2.

Mr.Anil Sakhare, Senior Advocate, i/b. Mr.Rohan S.Mirpury for the
Respondent No.3.

                        CORAM: R. D. DHANUKA AND
                               V. G.BISHT, JJ.

DATE : 11th FEBRUARY, 2021

JUDGMENT (PER R.D.DHANUKA, J.) :-

By this petition filed under Article 226 of the Constitution of

India, the petitioner has impugned the orders dated 19 th December,

2019 and 23rd September, 2020 passed by the Central Registrar of Co-

operative Societies, Government of India. All the respondents are

served. None appeared for the respondent nos. 4 and 5 though served

when the matter was called out.

2. Sometime in the year 2012, the petitioner was elected as a KVM

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director of the respondent no.3 bank. The chairman of the respondent

no.3 had issued a show cause notice on 12 th January, 2013 alleging that

the petitioner was a defaulter and accordingly he would be dismissed

under bye-law 51 from the respondent no.3 bank. The petitioner was

thereafter removed as a director on the ground that as per the RBIs

inspection report dated 24th December, 2012, he was a defaulter. Such

action on the part of the chairman of the respondent no.3 was

challenged by filing arbitration proceedings by the petitioner on 4th

August, 2013 under section 84 of the Multi State Co-operative

Societies Act, 2002 (for short the said MSCS Act).

3. The learned arbitrator made an award on 4th August, 2013

declaring that the petitioner was not a defaulter and was pleased to set

aside the order of dismissal of the petitioner. The said award made by

the learned arbitrator was not challenged by the bank and attained

finality. The petitioner was thereafter elected as a chairman on 16 th

May, 2016. It appears that on 5th June, 2017, the Reserve Bank of India

addressed a letter to the respondent no.2 stating that the complaint had

been received against the petitioner pursuant to which the Reserve

Bank of India had carried out an enquiry which allegedly indicates that

the accounts of the petitioner had been repaid out of fresh sanctions to

two other accounts/parties. The Reserve Bank of India accordingly KVM

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requested the Central Registrar to review the election of the petitioner

as a director and chairman of the respondent no.3 bank.

4. Pursuant to the said request made by the Reserve Bank of India

on 5th June, 2017, the respondent no.2 issued a show cause notice on 1 st

August, 2017 to the petitioner to show cause as to why the petitioner

should not be considered to be in violation of section 29(d) of the Act

and why the bank should not be directed to invoke the provision of

bye-law 51(5) of the respondent no.3 bank. The said show cause notice

was replied by the petitioner on 10th August, 2017. The petitioner

pointed out that vide arbitration award dated 4th August, 2013, the

arbitrator had declared that these accounts were not NPA and that the

allegations of RBI were factually incorrect.

5. On 16th May, 2018, the respondent no.2 observed that the issues

involved a lot of complexities which required technical examination

including expert opinion and that as such further examination thereof

would take time. The respondent no.3 accordingly passed an ex-parte

order restraining the petitioner from exercising the powers of chairman/

director including attending any board meetings in the capacity of

chairman/director of the bank till further orders. KVM

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6. This Court passed an order on 16 May, 2018 in the writ petition th

bearing no.2367 of 2018 filed by the petitioner impugning the said

order dated 16th May, 2018 and was pleased to set aside the order dated

16th May, 2018. By an order dated 5th February, 2019, this Court was

pleased to set aside the order dated 16 th May, 2018 by holding that any

such order had to be supported by statutory provisions. This court

observed that there was no statutory provision to pass such order dated

16th May, 2018 by the respondent no.2. The said order dated 16 th May,

2018 as well as order dated 5th February, 2019 were not impugned by

the respondent no.3 bank or by the respondent no.2 through the State

Government.

7. A perusal of the record indicates that on 30 th September, 2019,

the petitioner has been elected to the board of directors and thereafter

as a chairman by the newly elected board.

8. On 23rd October, 2019, the respondent no.4 filed a petition under

section 84 of the MSCS Act before the respondent no.2 for a

declaration that the petitioner was disqualified to be a member and

consequent thereto his election as a director and chairman was illegal.

He also challenged the order dated 29th August, 2019 by which his

nomination was rejected. He applied for a declaration that the entire KVM

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election process for 2919-24 was illegal. The petitioner was served

with the notice of hearing dated 10th December, 2019 by the respondent

no.2. In the meeting on 19th December, 2019 the respondent no.2 took

a view that as one of the three issues raised i.e. the alleged

disqualification of the petitioner based on the letter dated 5 th June, 2017

addressed by the Reserve Bank of India was already pending before

him, the earlier proceedings shall be clubbed for adjudication jointly.

9. The respondent no.3 filed a reply on 7 th February, 2020 before

the respondent no.2 pointing out that the matter was at preliminary

stage for examination of its maintainability and reference under section

84 of the MSCS Act. The petitioner vehemently raised an objection of

clubbing of two proceedings on 21st August, 2020 before the

respondent no.2.

10. On 23rd September, 2020, the respondent no.2 rejected the

application filed by the petitioner for recalling the direction for

clubbing the two proceedings. In view of the order dated 23 rd

September, 2020 passed by the respondent no.2, the respondent no.2

proposed to proceed with the hearing of the matter pursuant to the

letter addressed by the Reserve Bank of India and the dispute filed by

the respondent no.4 himself.

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11. Mr. Chinoy, learned senior counsel for the petitioner invited our

attention to various documents annexed to the petition and would

submit that at the first instance the Reserve Bank of India could not

have directed the respondent no.2 to look into the complaint against the

petitioner vide letter dated 5th June, 2017 and to review the election of

the petitioner as a director and chairman of the respondent no.3 bank.

He submits that in absence of any power of Reserve Bank of India to

direct the respondent no.2 to review the election of the petitioner as a

chairman and director of the respondent no.3 bank, no such directives

could be issued by Reserve Bank of India at all. He submits that if

there was any dispute in respect of the election of the petitioner as a

director and chairman of the respondent no.3, such dispute could be

referred to the arbitration under section 84.

12. It is submitted by the learned counsel that insofar as the dispute

filed by the respondent no.4 before the respondent no.2 is concerned,

the respondent no.2 could not have acted as an arbitrator to resolve the

dispute between the respondent no.4 and the petitioner if any. He

strongly placed reliance on section 84(4) of the MSCS Act and would

submit that under the said provision the Central Registrar is only

empowered to appoint the arbitrator for adjudication of the disputes KVM

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falling under section 84(1) of the Act and not to act as an arbitrator

himself.

13. It is submitted that since the respondent no.2 could not act as

arbitrator and since the Reserve Bank of India has no power to direct

the respondent no.2 to look into the issue of election of the petitioner to

the post of director and chairman, there was no question of the

respondent no.2 clubbing both the proceedings.

14. Mr.Chinoy, learned senior counsel fairly invited our attention to

the affidavit in reply filed by the respondent no.4 and would submit

that the respondent no.4 has not able to point out in the affidavit in

reply as to how the dispute raised by him challenging the election of

the petitioner as well as the rejection of the nomination form of the

respondent no.4 by the respondent no.3 bank could be entertained by

the respondent no.2.

15. Mr.Sakhare, learned senior counsel for the respondent no.3

tendered a copy of the order dated 7th July, 2020 passed by the

Government of Maharashtra under section 84(4) of the MSCS Act

thereby appointing Dr.R.M.Khan as arbitrator for the Multi State

Society for a period of one year from the date of the said order. He KVM

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states that in view of the said order already passed by the Government

of Maharashtra, respondent no.2 himself could not have acted as an

arbitrator.

16. Mr.Bhate, learned senior counsel for the respondent nos. 1 and 2

on the other hand though tried to defend the action of the respondent

no.2, could not point out any provision either under the Banking

Regulation Act or under the MSCS Act empowering the Reserve Bank

of India to issue such directions to the respondent no.2 to review the

election of the petitioner to the post of director as well as chairman or

the Central Registrar to act as an arbitrator in the dispute relating to the

election under section 84(2)(c) of the MSCS Act.

17. Learned counsel for the respondent nos. 1 and 2 invited our

attention to the order dated 5th February, 2019 passed by this Court in

Writ Petition No. 2367 of 2018 filed by the petitioner against the Union

of India and others and would submit that by the said order this Court

had directed that the further proceedings on the basis of the show cause

notice dated 1st August, 2017 shall continue and the Union of India and

the Central Registrar shall take the said notice to its logical conclusion,

as expeditiously as possible. He submits that in view of the said order

passed by the Division Bench of this Court, the petitioner cannot be KVM

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now allowed to raise an issue that the Reserve Bank of India had no

power to issue any directions to the respondent no.2 vide letter dated 5th

June, 2017 pursuant to which the said show cause notice dated 1 st

August, 2017 came to be issued by the respondent no.2.

18. A perusal of the record indicates that the petitioner was already

elected as a chairman of the board of directors initially in the month of

May 2016. The said election of the petitioner to the post of chairman

of the board of directors was not impugned by any of the aggrieved

party. The Reserve Bank of India however addressed a letter on 5 th

June, 2017 to the respondent no.2 pointing out the alleged complaint

received against the petitioner and requested the Central Registrar to

review the election of the petitioner as director and chairman of the

respondent no.3 bank.

19. Learned counsel for the respondent nos. 1 and 2 could not point

out any such power of the Reserve Bank of India under the provisions

of Banking Regulation Act or any other provision of law to request or

direct the Central Registrar to review the election of the petitioner as a

director and chairman of the respondent no.3 bank.

20. The election of the petitioner as a chairman of the board of KVM

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directors of the respondent no.3 bank on 16 th May, 2016 was not

challenged by any of the aggrieved party by invoking provisions of

section 84(2)(c) of the MSCS Act. A perusal of section 84(2)(c) of the

said MSCS Act clearly indicates that any dispute arising in connection

with the election of any officer of a multi-State co-operative society

shall be deemed to be disputes touching the constitution, management

or business of a multi-State co-operative society. Section 84(2) (c) has

to be read with section 84(1) which provides that such disputes are

required to be referred to the arbitration.

21. Under section 84(3) of the MSCS Act, it is clearly provided that

if any question arises whether a dispute referred to arbitration under

section 84(1) is or is not a dispute touching the constitution,

management or business of a multi-State co-operative society, the

decision of the arbitrator thereon shall be final and shall not be called

in question in any court.

22. In our view, merely because this Court in Writ Petition No.2367

of 2018 filed by the petitioner had directed the respondent nos. 1 and 2

to continue further proceedings on the basis of the show cause notice

dated 1st August, 2017 and to take such notice to its logical conclusion,

the said order would not confer jurisdiction on the respondent nos. 1 KVM

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and 2 to adjudicate upon the issue as to whether the election of the

petitioner as a director and chairman of the respondent no.3 bank was

valid or not. A perusal of the said order passed by this Court indicates

that the issue before this Court in the said writ petition was limited.

The petitioner had impugned the order dated 16th May, 2018 addressed

by the Joint Secretary to the Government of India who is the Central

Registrar of Co-operative Societies under the provisions of the said

MSCS Act thereby restraining the petitioner from exercising any

powers of chairman/director including attending any board meetings in

the capacity of chairman/director of the respondent no.3 bank till

further orders. There was no such direction issued by the Reserve

Bank of India which is the subject matter of this petition in the said

writ petition.

23. Be that as it may, this Court did not decide the issue whether

Reserve Bank of India could issue any such directions to the Central

Registrar to review the election of the petitioner as a director and

chairman of the respondent no.3 bank under the provisions of the

Banking Regulation Act or any other provisions of law. We are thus

not inclined to accept the contention of the learned counsel for the

respondent nos. 1 and 2 that in view of the said order passed by this

court on 5th February, 2019 in the said Writ Petition No. 2367 of 2018 KVM

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filed by the petitioner, the respondent no.2 had jurisdiction to

adjudicate upon the validity of election of the petitioner as director and

chairman of respondent no.3 bank. The reliance placed by the learned

counsel for the respondent nos. 1 and 2 on the said order dated 5 th

February, 2019 is thus misplaced and would not advance the case of the

respondent nos. 1 and 2. In our view, the respondent no.2 thus did not

have any jurisdiction to adjudicate upon or to review the election of the

petitioner as a director and chairman of the respondent no.3 bank. He

thus could not have passed any order for clubbing of the issue of

election of the petitioner with the dispute filed by the respondent no.4.

24. Under section 84(2)(c) of the Multi State Bank any dispute

arising in connection with the election of any officer of a multi-State

co-operative society shall be deemed to be disputes touching the

constitution, management or business of a multi-State co-operative

society and is thus required to be referred to the arbitration in

accordance with the provisions of section 84(1). Under section 84(4),

the dispute has to be referred to arbitration under sub-section (1) of

section 84 and has to be settled or decided by the arbitrator to be

appointed by the Central Registrar and not by the Central Registrar.

25. Learned senior counsel for the respondent no.3 has already KVM

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produced a copy of the order under section 84(4) of the MSCS Act

passed by the Government of Maharashtra, Commissioner for

Cooperation and Registrar of Cooperative Societies, Maharashtra State,

Pune thereby appointing Dr.R.M.Khan as an arbitrator of the Multi

State Society for a period of one year from the date of the said order

dated 7th July, 2020.

26. In our view the Central Registrar has no power to act as an

arbitrator for adjudicating upon the dispute referred in section 84(1)

read with section 84(2). Such dispute can be referred only to the

arbitrator to be appointed by the Central Registrar under section 84(4)

for adjudication. The respondent no.2 thus could not have even

otherwise proceeded with the dispute filed by the respondent no.4 on

23rd October, 2019 before the respondent no.2. The respondent no.2

ought to have directed the respondent no.4 to invoke the provisions of

section 84(1) of the MSCS Act if the dispute raised by the respondent

no.4 would fall under one of the dispute described in section 84(1) of

the MSCS Act and to refer such dispute to arbitration. The respondent

no.2 has acted totally without jurisdiction and contrary to the

provisions of MSCS Act and also the Banking Regulation Act.

27. The Multi State Co-operative Societies Act, 2002 is a self KVM

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contained Code and provides the complete mechanism for resolution of

disputes specified in section 84(1) read with section 84(2) of the said

Act including the dispute relating to election of any of the officer of the

Multi State Co-operative Society. The respondent no.2 has no power to

decide the validity of election of any such officer by exercising powers

under section 84(4) of the Act.

28. We have perused the affidavit in reply filed by the respondent

no.4. A perusal of the said affidavit indicates that the respondent no.4

has raised various issues on the merits of the dispute filed by him in the

affidavit in reply and has not disputed the contention of the petitioner

raised in the petition challenging the jurisdiction of the respondent no.2

either to club the dispute filed by the respondent no.4 with the

directives issued by the Reserve Bank of India or that the respondent

no.2 had no jurisdiction to act as an arbitrator to resolve the dispute

raised by the respondent no.4 against the petitioner. It is made clear

that this Court has not expressed any views on the merits of the dispute

filed by the respondent no.4 about the rejection of his nomination form

or other issues raised by him on the merits regarding the election of the

petitioner. If any such disputes are referred to arbitration in accordance

with section 84 of the said Act, the same shall be decided on its own

merits.

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29. We, therefore, pass the following order :-

(a) Writ petition is made absolute in terms of

prayer clauses (a) and (b). No order as to costs.

(b) In view of the disposal of the writ

petition, interim application pending, if any,

also stands disposed of.

      [V.G.BISHT, J.]                         [R. D. DHANUKA, J.]