Bombay High Court
Khairy Sewa Sahakari Society, ... vs The State Of Maharashtra, Thr. ... on 27 April, 2023
Bench: Avinash G. Gharote
01. WP 1978 of 2023.odt
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR
WRIT PETITION NO.1978/2023
Dattapur Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1968/2023
Sonora Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1969/2023
Sawla Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1970/2023
Taroda Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1971/2023
Deogaon Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1972/2023
Wathoda Seva Sahakari Society Ltd. Through its President and another
...Versus...
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01. WP 1978 of 2023.odt
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Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1973/2023
Tuljapur Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1974/2023
Sonegaon Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1975/2023
Gavha Farkade Seva Sahakari Society Ltd. Through its President and
another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1976/2023
Asegaon Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1977/2023
Kharda Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.1979/2023
Wagholi Seva Sahakari Society Ltd. Through its President and another
...Versus...
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01. WP 1978 of 2023.odt
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Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.2307/2023
Amdori Seva Sahakari Society Ltd. Through its President and another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2308/2023
Dhotra Seva Sahakari Society Ltd. Through its President and another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2309/2023
Mogra Seva Sahakari Society Ltd. Through its President and another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2310/2023
Savanga Vithoba Seva Sahakari Society Ltd. Through its President and
another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2311/2023
Dahigaon Dhawade Seva Sahakari Society Ltd. Through its President and
another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2312/2023
Jalka Jagtap Seva Sahakari Society Ltd. Through its President and another
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01. WP 1978 of 2023.odt
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...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2313/2023
Malkhed Seva Sahakari Society Ltd. Through its President and another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2314/2023
Shirajgaon Korda Seva Sahakari Society Ltd. Through its President and
another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2315/2023
Bagapur Seva Sahakari Society Ltd. Through its President and another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.2316/2023
Tembhurni Seva Sahakari Society Ltd. Through its President and another
...Versus...
Assistant Registrar, Co-operative Society, Chandur Railway, District
Amravati and others WITH
WRIT PETITION NO.1967/2023
Ashata Zada Seva Sahakari Society Ltd. Through its President and another
...Versus...
Divisional Joint Registrar, Cooperative Society, Amravati Division Amravati
and others WITH
WRIT PETITION NO.2584/2023
Borgaon-peth Seva Sahakari Society Through its President
...Versus...
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01. WP 1978 of 2023.odt
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The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2580/2023
Bhugaon Seva Sahakari Society Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2579/2023
Kandli Seva Sahakari Society Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2581/2023
Kushta Seva Sahakari Society, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2583/2023
Vadnerbhujanga Seva Sahakari Society, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2582/2023
Shindi Seva Sahakari Society, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2578/2023
Salepur Seva Sahakari Society, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
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01. WP 1978 of 2023.odt
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WRIT PETITION NO.2577/2023
Nizampur Seva Sahakari Society, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2585/2023
Khairy Sewa Sahakari Society, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative, Pune
and others WITH
WRIT PETITION NO.2622/2023
Borgaon Dori Seva Sahakari Sanstha Maryadit, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2623/2023
Shampur Seva Sahakari Sanstha Maryadit, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2627/2023
Naygaon Seva Sahakari Sanstha Maryadit, Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2741/2023
Gramseva Sahakari Sanstha Maryadit, Bori Adgaon Tq. Khamgaon
Through its Director
...Versus...
Assistant Registrar, Co-operative Society, Khamgaon, Buldhana and others
WITH
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01. WP 1978 of 2023.odt
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WRIT PETITION NO.2759/2023
Gramseva Seva Sahakari Sanstha Akoli Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2760/2023
Gramseva Sahakari Sanstha, Pimprala Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2761/2023
Gramseva Seva Sahakari Sanstha, Nagapur Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2762/2023
Gramseva Seva Sahakari Sanstha, Amsari Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2763/2023
Gramseva Seva Sahakari Sanstha, Poraj Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2764/2023
Gramseva Seva Sahakari Sanstha, Awar Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
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01. WP 1978 of 2023.odt
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WRIT PETITION NO.2765/2023
Gramseva Seva Sahakari Sanstha, Gondhanapur Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2766/2023
Gramseva Seva Sahakari Sanstha, Jaypur Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2767/2023
Gramseva Seva Sahakari Sanstha, Bhandari Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2768/2023
Gramseva Seva Sahakari Sanstha, Ambetakali Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2769/2023
Gramseva Seva Sahakari Sanstha, Hingana Karegaon Through its
President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2770/2023
Gramseva Seva Sahakari Sanstha, Palshi Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
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01. WP 1978 of 2023.odt
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WRIT PETITION NO.2771/2023
Gramseva Seva Sahakari Sanstha, Sutala Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2772/2023
Gramseva Seva Sahakari Sanstha, Lakhanwada Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others WITH
WRIT PETITION NO.2773/2023
Gramseva Seva Sahakari Sanstha, Kalegaon Through its President
...Versus...
The State of Maharashtra, Through Commissioner of Co-operative
Societies, Pune and others
----------------------------------------------------------------------------------------------
Mr. C.S. Kaptan, Senior Advocate a/b Mr. R.S. Kalangiwale, Advocate; Mr. M.V.
Samarth, Senior Advocate a/b Mr. V.P. Ingle, Advocate; Mr. S.S. Shingane, Mr.
Anand Deshpande and Mr. U.J. Deshpande, Advocates for the respective
petitioners
Ms N.P. Mehta; Ms Tajwar Khan, Mrs. M.A. Barabde; Mr. N.R. Patil, AGPs for the
respondents/State
Mr. A.H. Daga, Mr. J.B. Kasat and Mr. A.A. Naik, Advocates for the respective
intervenors/respondents
Mr. H.S. Chawhan; Mr. V.V. Dahat and Mr. Pranav Deshmukh, Advocates for the
respective liquidators
Mr. A.M. Ghare, Advocate, addressed to this Court
----------------------------------------------------------------------------------------------
CORAM : AVINASH G. GHAROTE, J.
DATE : 27/04/2023
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01. WP 1978 of 2023.odt
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ORDER:
1. Heard Mr. Kaptan, learned senior counsel and Mr. M.V.
Samarth, learned senior counsel, Mr. S.S. Shingane; Mr. Anand
Deshpande and Mr. U.J. Deshpande, learned counsels for the
respective petitioners.
2. In all these petitions, Assistant Government Pleader
Ms N.P. Mehta appears for the respondents/State and the
authorities; Advocate Mr. A.H. Daga appears for the respondent
No.5/complainant in Writ Petition No.1978/2023 and the
complainant in other writ petitions.
3. Mr. A.A. Naik and Mr. J.B. Kasat, learned counsels
appear for the Amravati District Central Cooperative Bank,
Mr. H.S. Chawhan, Mr. V.V. Dahat and Mr. Pranav Deshmukh, learned
counsels appear for the respective liquidators and Mr. Ajay Ghare,
learned counsel has also addressed on this issue.
4. All these petitions have been heard and can be decided
together as the basic pleas raised in all of them is the lack of
opportunity of hearing being granted to the petitioners before the
order of appointment of an interim liquidator under Section 102(1)
(c)(iv) of the Maharashtra Co-operative Societies Act, 1960 (for
01. WP 1978 of 2023.odt
short, "MCS Act", hereinafter), came to be passed by the Assistant
Registrar, Co-operative Societies and the Revisional Authority, in
Revision there against has refused to stay its effect and operation. A
plea is also raised that the Assistant Registrar, Co-operative Societies,
did not follow the mandate and requirements of Section 102 (1) of
the MCS Act, while passing the order appointing an interim
liquidator and therefore the same is vitiated. A plea is also raised
that the relevant Government Resolutions as applicable thereto, have
been totally misconstrued and though they spelt out a position in
favour of the petitioners, they have been not applied. A further plea
is raised that though the revisions are pending, the Revisional
Authority ought to have stayed the effect and operation of the order
passed by the Assistant Registrar, during the pendency of the
revision, order refusing which is also the order impugned herein.
5. As the pleas are common they can be decided by a
common order. For the sake of ready reference the facts in Writ
Petition No.1978/2023, are being considered.
The petitioner/society was issued a show-cause notice
on 14/02/2023 by the respondent No.2 calling upon it to show
cause as to why the interim liquidator ought not to be appointed by
01. WP 1978 of 2023.odt
fixing the date of appearance on 21/02/2023 (Annexure-E/pg. 71).
The petitioner filed Writ Petition No.1135/2023 challenging the
show-cause notice in which an order was passed on 20/02/2023
that in case if any order adverse to the petitioner is passed at the end
of the hearing to be held upon the impugned show-cause notice, the
same shall not take effect for next two weeks from the date of
passing of such an order, in terms of which, the petition came to be
disposed of. The hearing was kept on 21/02/2023, on which date,
another bunch of petitions was listed before this Court being Writ
Petition No.1156/2023 and connected matters, in which, stay to the
impugned show-cause notices issued by the Assistant Registrar of
Cooperative Societies was granted. Before the Assistant
Registrar/respondent no.2 time to file reply was filed on
21/02/2023 and the matter was posted on 28/02/2023. The copy of
stay order granted by this Court on 21/02/2023 in Writ Petition
No.1156/2023 and connected matters was placed before the
Assistant Registrar, as a result of which, on 28/02/2023, on account
of the stay as none appeared, the Assistant Registrar adjourned the
matter by observing that the action would be taken in terms of the
order which may be passed in Writ Petition No.1156/2023 and
01. WP 1978 of 2023.odt
connected matters, without fixing a date for further appearance. On
03/03/2023, Writ Petition No.1156/2023 and connected matters
was disposed of in terms of the order passed in Writ Petition
No.1135/2023 (page 38). The Assistant Registrar on 15/03/2023
passed an order appointing an interim liquidator which came to be
challenged before the Divisional Joint Registrar by way of a revision
in which the prayer for stay has been rejected on 24/03/2023. A
similar state of affairs prevails in all other matters except for some
change in dates and in some cases where replies have been filed by
the societies in pursuance to the show-cause notices issued by the
Assistant Registrar.
6. Mr. C.S. Kaptan, learned senior counsel for the
respective petitioners contends as under :
a] The action against all the societies have been initiated by the
Assistant Registrar, Co-operative Societies, not suo motu but based
upon a complaint sent by the complainant to the Commissioner
cooperation, which has been sent downstairs, and has ultimately
landed with the Assistant Registrar instructing him to take action as
per law, for which reliance is placed by him upon the letter by the
Commissioner to the District Deputy Registrar ("DDR" for short)
01. WP 1978 of 2023.odt
dated 06/02/2023 (page 20) and the consequent letter by the DDR
to his subordinate Officer dated 13/02/2023 (page 21) asking them
to take action. The show-cause notice dated 14/02/2023, has
therefore been issued in pursuance to the aforesaid communication
calling upon the petitioner/society to show cause.
b] Mr. Kaptan, learned senior counsel for the petitioner,
contends that before taking any action against the petitioner/society,
the Assistant Registrar has to satisfy himself about the requirements
of Section 102 (1) of the MCS Act, for the purpose of which, since
the action of passing of an interim order of liquidation ensues in
drastic consequence to the petitioner/society, the requirement of a
show cause notice and an opportunity of being heard, is necessarily
inbuilt in the provision itself of which, there has been a violation. He
submits, that though this position was recognized by the Assistant
Registrar Co-operative Societies, as a result of which, he has issued
a show-cause notice dated 14/02/2023 calling upon the
petitioner/society to show cause as to why an interim order
appointing a liquidator ought not to be issued, sufficient opportunity
of being heard has been denied. It is submitted, that inspite of the
order dated 03/03/2021 passed in Writ Petition No.1165/2023 and
01. WP 1978 of 2023.odt
connected matters which in turn, in not so many words indicated the
requirement of an opportunity of hearing, the order sheets would
indicate denial of the same. It is also submitted that inspite of the
fact, that time was sought for placing the reply on record, the
opportunity was not granted and in cases in which the reply was
submitted, the same has not been considered and so also an
opportunity of hearing has also not been granted.
c] By relying upon Chandrapur Zilla Sahakari Krushi and
Gramin Bahuudeshiya Development Bank Ltd. Vs. State of
Maharashtra and others 2004 (1) Mh.L.J. 232, it is submitted, that
since the action under Section 102 (1) of the MCS Act, results in a
drastic consequence vis-a-vis the society which is sought to be put
into liquidation by an interim order, the opportunity of hearing by
applying the principles of audi alteram partem, has to be held to be
inbuilt in the provisions of Section 102 (1) of the MCS Act, prior to
the passing of even an interim order appointing a liquidator. He
further relies upon the State Bank of India and others Vs. Rajesh
Agarwal and others, 2023 SCC OnLine SC 342, in support of this
contention.
01. WP 1978 of 2023.odt
d] It is also contended, that by such an order of appointing an
interim liquidator not only the managing committee of the society is
affected but the rights of the members of the society is also effected,
inasmuch as, even though the aims and objects of the society are to
provide financial assistance to the farmers, however since the
proceedings for liquidation, take years together to decide, it is the
farmers who are the primary members of the society, who are
deprived of the financial assistance, and therefore, when the order
under Section 102 (1) of the MCS Act, results in stoppage of the
work of the society itself, the question of pre-decisional hearing
before passing of the impugned order of liquidation assumes
significance and is something which cannot be denied to the
societies. It is also contended, that in fact in some of the matters the
societies have shown a profit in the preceding years, and therefore,
there was no requirement at all for invoking of Section 102 (1) of
the MCS Act in their cases, and therefore, on this count itself also
the need of a pre-decisional hearing before appointing an interim
liquidator assumes significance.
e] It is also contended, that the resolutions dated 23/09/2013,
06/09/2014 and 11/06/2021 and 13/04/2023, all are aimed at
01. WP 1978 of 2023.odt
ensuring the empowerment, survival and continuance of the
societies and are not with an intention to see that their functioning is
impaired.
f] Insofar as the resolution dated 23/09/2013 is concerned, it is
contended that the entire purpose of the resolution, was to ensure
empowerment of the societies in its functioning for the purpose of
assuring its aims and objects and even otherwise only clause 6 of the
said resolution was attracted inasmuch as, it provided an
opportunity for the undertaking of the exercise of amalgamation or
financial empowerment, prior to its liquidation being effected.
g] It is also contended that the powers for amalgamation as
contained in Section 18 B of the MCS were to be exercised by the
registrar and not by the society. It is therefore submitted that this
exercise of amalgamation and financial empowerment has to be read
into in the provisions of Section 102 (1)(c)(iv) of the MCS Act as it
created a legitimate expectation in the societies of an option to be
exercised before the drastic steps of liquidation, interim or
otherwise, was to be taken, for which reliance is placed upon Food
Corporation of India Vs. M/s Kamdhenu Cattle Feed Industries
(1993) 1 SCC 71 (para 8) and Shantilal Lalchand Changede and
01. WP 1978 of 2023.odt
others Vs. Prasad Oak and others 2009 SCC OnLine Bom 1269 (para
14) regarding the approach of the District Registrar to be adopted in
such cases. It is therefore submitted that since the opportunity of
hearing has not been afforded by the Assistant Registrar before
passing of the impugned order, the same was not sustainable as a
result of which the Revisional Authority i.e. Joint Registrar should
have exercised his powers and granted stay to the effect and
operation of the order appointing an interim liquidator under the
aforesaid provision.
7. Mr. M.V. Samarth learned senior Counsel for the
respective petitioners adopts the argument of Mr. C.S. Kaptan
learned senior Counsel and submits that apart from there being no
inquiry under the provision as mentioned in Section 102(1) of the
MCS Act, the other Government Resolutions on which reliance is
placed, also support the empowerment of the societies instead of
throwing them into liquidation by an order, interim or otherwise.
8. Mr. S.S. Shingane appearing for the petitioners in Writ
Petition Nos.2622/2023, 2623/2023 & 2627/2023; Mr. Anand
Deshpande, learned Counsels appearing for the petitioners in Writ
Petition No.2741/2023 and Mr. U.J. Deshpande, learned counsel
01. WP 1978 of 2023.odt
appearing for the petitioners in Writ Petition Nos.2759/2023 to
2773/2023 adopt the arguments of the aforesaid learned Senior
Counsels.
9. The learned Additional Government Pleader
Ms. N.P. Mehta opposes the contention and submits that the
provisions of Section 102(1) of the MCS Act do not contemplate a
pre-decisional hearing to be afforded to the societies against which
the order under Section 102(1)(c)(iv) of the MCS Act has to be
passed, as according to her there is no such requirement built in, in
the said provision. By relying upon the language of the aforesaid
provision, it is submitted that what is contemplated is a post
decisional hearing under Section 102(2) of the MCS Act, of which
the petitioners can always avail of, as the proceedings before the
Assistant Registrar has not culminated into the passing of a final
order. It is thus submitted that on this count the writ petition is itself
premature and requires to be dismissed as such. Reliance for this
proposition that no pre-decisional hearing is provided before an
order appointing an interim liquidator is passed, is placed upon
Chandrakant Jagannath Ghodke and others Vs. Commissioner for
Co-operation & Registrar, Co-operative Societies & others 2003 (6)
01. WP 1978 of 2023.odt
Bom C.R. 238 (paras 16, 22, 24 to 28 and 43) and on Gadchiroli
Zilla Sahakari Krushi and Gramin Bahu-Udeshiya Development Bank
Limited Vs. State of Maharashtra and others 2003 SCC OnLine Bom
48 (paras 11 to 14 , 16 and 17). It is also submitted that the later
judgment of the learned Division Bench of this Court in Dughganga
Sahakari Dudh Utpadak Sangh Maryadit Vs. Divisional Joint
Registrar, Pune and others 2020 (5) ALL MR 545 which takes a
contrary view is per incuriam and therefore cannot be relied upon,
for which reliance is placed upon National Insurance Company
Limited Vs. Pranay Sethi and others (2017) 16 SCC 680 (para 28).
It is further submitted that the order appointing an interim
liquidator is a detailed order and therefore, does not call for any
interference at the hands of this Court.
10. Advocate Mr. Ajay Ghare supporting the argument of
Ms. Mehta, learned Assistant Government Pleader and submits that
Section 102 requires a subjective satisfaction, only at the stage of
Section 102 (2) of the MCS Act and it is not necessary for the
Assistant Registrar to go in for amalgamation only. He submits that
in so far as the plea for amalgamation is concertinaed, there is no
ground whatsoever raised in any of the replies filed by the
01. WP 1978 of 2023.odt
petitioners in those cases where replies have been filed and even
otherwise, the plea can be gone into even post the stage of the
passing of the order of the appointment of interim liquidator. It is his
contention that considering the language of Section 103(2)to (4) of
the MCS Act, the passing of an order appointing interim liquidator is
merely a temporary suspension of the right of being elected as an
executive committee member, which can be restored upon
satisfaction being found by the Assistant Registrar, to the material
placed before him regarding the financial health of the societies and
therefore, the apprehension by the Petitioners is clearly unjustified.
11. Mr. Alok Daga, learned counsel for the original
complainant supports the argument made by the learned Assistant
Government Pleader
12. Mr. Dahat, learned counsel for the liquidator submits
that he has not yet taken charge and would be bound by whatever
decision as is rendered.
13. Mr. A.A. Naik and Mr. J.B. Kasat, learned counsels for
the District Central Co-operative Bank, Amravati, support the stand
taken by the Petitioners and contend that the action of appointing
an interim liquidator is one which would adversely affect the
01. WP 1978 of 2023.odt
working of the Bank also, as on account of the said order, the
repayment of loans of the bank do not take place jeopardizing the
financial viability of the bank. It is also contended that since
Section 102 (2) of the MCS Act, grants an opportunity of hearing to
the creditors of the society, which in this case is the District Central
Co-operative Bank, Amravati and the consequences of an interim
order appointing an interim liquidator as well as that of a final order
of appointing a liquidator are the same, the opportunity of hearing
to a creditor before passing of an interim order appointing a
liquidator will have to be held inbuilt in the provisions of Section
102(1) of the MCS Act.
14. On 29.03.2023 while issuing the notice the following
position was recorded :
"2. The petitions challenge the order dated
24.03.2023 passed by the respondent No.1 in revision
against the order dated 15.03.2023 passed by the
respondent No. 2 appointing a liquidator, whereby the
request for grant of stay has been rejected.
3. Mr. Kaptan, learned Senior Counsel for the
petitioners submits, that upon the show cause notice dated
14.02.2023 which fixed the date as 21.02.2023, Writ
Petition No. 1165/2023 alongwith other connected matters
came to be filed by the petitioners before the learned
01. WP 1978 of 2023.odt
Division Bench of this Court, in which by an order dated
21.02.2023, the effect and operation of the notice was
stayed. It is contended, that this position was brought to the
notice of the respondent No.2 on 27.02.2023, which was
taken into consideration by him on 28.02.2023 by observing
the matters shall be decided after the decision of the Writ
Petitions by the High Court. It is however contended, that
no date was fixed thereafter and without intimating any
date, the interim order appointing the liquidator came to be
passed on 15.03.2023, as the Writ Petitions filed by the
petitioners came to be disposed on 03.03.2023. It is
therefore submitted, that no opportunity of hearing was
afforded to the petitioners before the interim order
appointing the liquidator dated 15.03.2023 was passed. In
the revision filed there against, the prayer for interim relief
seeking stay of the order dated 15.03.2023 has been
rejected without considering this position."
15. For the sake of ready reference Sections 102 and 103 of
the Maharashtra Co-operative Societies Act, 1960 Act being relevant
are quoted as under :
"Section 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 89A] or on
the report of the auditor auditing the accounts of the
society, or
01. WP 1978 of 2023.odt
(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
by-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 heard,
may issue a final order, vacating or confirming the interim
order.
Section 103. Appointment of Liquidators
(1) When an interim order is passed under the last
preceding section or a final order is passed under that
section, for the winding-up of a society, the Registrar may,
in accordance with the rules, appoint a person to be
Liquidator of the society, and fix his remuneration.
(2) On issue of the interim order, the officers of 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 or appears to be entitled and, of all books,
records and other documents pertaining to the business of
the society and, shall have no access to any of them.
(3) When a final order is passed confirming the interim
order, the officers of the society shall vacate their offices,
01. WP 1978 of 2023.odt
and while the winding up order remains in force the
general body of the society shall not exercise any powers.
(4) The person appointed under this section as Liquidator
shall, subject to the general control of the Registrar,
exercise all or any of the powers mentioned in section 105.
The Registrar may remove such person and appoint
another in his place, without assigning any reason.
(5) The whole of the assets of the society shall on the
appointment of Liquidator under this section vest in such
Liquidator, and notwithstanding anything contained in any
law for the time being in force, if any immovable property
is held by a Liquidator on behalf of the society, the title
over the land shall be complete as soon as the mutation of
the name of his office is effected, and no Court shall
question the title on the ground of dispossession, want of
possession or physical delivery of possession.
(6) In the event of the interim order being vacated, the
person appointed as Liquidator shall hand over the
property, effects and actionable claims and books, records
and other documents of the society to the officers who had
delivered the same to him. The acts done, and the
proceedings taken by Liquidator, shall be binding on the
society, and such proceedings shall, after the interim order
has been cancelled under the preceding section, be
continued by the officers of the society."
16. Section 102 of the MCS Act, provides for the Winding
up of a Society. A plain reading of the aforesaid provisions would
indicate that Section 102(1) of the MCS Act, on the face of it does
not contemplate a pre-decisional hearing to be afforded to a party
before passing of an order appointing an interim liquidator.
01. WP 1978 of 2023.odt
17. For the invoking of Section 102(1) (a) of the MCS Act,
four contingencies are provided :
(i) an inquiry to have been held under Section 83 by the Registrar
into the constitution, working and financial condition of the Society,
in the manner as contemplated therein ; or
(ii) an inspection has been made under Section 84 of the MCS Act;
or
(iii) an inspection has been made under Section 89A of the MCS Act,
or
(iv) on receipt of the report of the auditor auditing the accounts of
the society.
In all these contingencies, before invoking of the power to appoint
an interim liquidator, there is already in existence an
inquiry/inspection/report of the auditor, that is to say material
collected/ inspected /gathered by the Registrar/ auditor, which can
form the basis on which action can be taken for the appointment of
an interim liquidator.
18. The invoking of Section 102(1) (b) of the MCS Act, can
be on receipt of an application made upon a resolution carried by
three-fourth of the members of a society present at a special general
01. WP 1978 of 2023.odt
meeting called for the purpose. In this situation, the society itself has
called for the winding up of the society by passing a resolution in its
special general meeting by a three-fourth majority and therefore the
Registrar in such a situation, has only to be satisfied regarding the
legality and validity of such a resolution and nothing else.
19. The invoking of Section 102 (1) (c) of the MCS Act, can
be by the Registrar 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 member's 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 by-
laws, and the Registrar is of the opinion that a society ought to be
wound-up. In the situations as contemplated by Section 102(1)(c)
(i), (ii) and (iii) of the MCS Act, the record as maintained by the
Registrar under various provisions of the MCS Act, including the
audited reports of the Societies would be available with the
Registrar, to consider the health of the Society. However, in case of
the situation as contemplated in Section 102(1)(c) (iv) of the MCS
Act, the factum of ceasing to comply with any conditions as to
01. WP 1978 of 2023.odt
registration and management in this Act or the rules or the by-laws
of the society, would be a position which will have to be ascertained.
In all the above contingencies, it is open for the
Registrar to issue an interim order directing it to be wound-up.
20. It is however necessary to note that in any of the
situations as contemplated by the various sub-sections of Section
102(1) of the MCS Act, the result is that the society, due to the order
of appointment of an interim liquidator, tends to loose, its
functionality and working, as on account of passing of such an order,
in view of Section 103(2) of the MCS Act, on issuance of the interim
order, the officers of the society have to hand over to the Liquidator
the custody and control of all the property, effects and actionable
claims to which the society is or appears to be entitled; of all books,
records and other documents pertaining to the business of the
society and have no access to any of them. Thus, for all purposes,
the entire functioning and working of the society, including its
control is lost to the managing committee and vests in the liquidator
under Section 103(5) of the MCS Act, as the said provisions do not
make any distinction between the passing of an interim or final
order for the provision to come into effect. This is further confirmed
01. WP 1978 of 2023.odt
by the provisions of Section 103(3) of the MCS Act, which merely
says that when a final order is passed confirming the interim order,
the officers of the society shall vacate their offices, and while the
winding-up order remains in force, the general body of the society
shall not exercise any powers. Thus for all purposes, the entire
control of the society, including that of its assets, pass on to the
liquidator once the order appointing an interim liquidator is issued
under Section 102(1) of the MCS Act. This would clearly indicate
the extremely penal nature of the provision, as the consequences, of
passing of such an order of appointment of an interim liquidator,
deprives the managing committee of the society of not only the
functioning of the society for the furtherance of its aims and objects
but also of any control over its assets, till the time the interim
appointment is in force. Thus when the deprivation of rights is of
such a nature, it is necessary that such deprivation can only be
made, after following the principles of audi alterm partem. All that it
contemplates is an opportunity of being heard.
21. In Rajesh Agarwal (supra) the Hon'ble Apex Court,
while considering the applicability of the principle of audi alterm
partem, in the context of directions as contained in the Reserve Bank
01. WP 1978 of 2023.odt
of India (Frauds Classification and Reporting by Commercial Banks
and Select FI's) Directions 2016, issued by the Reserve Bank of India,
and that it did not envisage any opportunity of being heard to the
borrowers before classifying their accounts as fraudulent, considered
the entire law, on the point till the date of its decision and held as
under :
"29. We need to bear in mind that the principles of natural
justice are not mere legal formalities. They constitute
substantive obligations that need to be followed by
decision-making and adjudicating authorities. The
principles of natural justice act as a guarantee against
arbitrary action, both in terms of procedure and substance,
by judicial, quasi-judicial, and administrative authorities.
Two fundamental principles of natural justice are
entrenched in Indian jurisprudence : (i) nemo judex in
causa sua, which means that no person should be a judge
in their own cause; and (ii) audi alteram partem, which
means that a person affected by administrative, judicial or
quasi-judicial action must be heard before a decision is
taken. The courts generally favor interpretation of a
statutory provision consistent with the principles of natural
justice because it is presumed that the statutory authorities
do not intend to contravene fundamental rights.
Application of the said principles depends on the facts and
circumstances of the case, express language and basic
scheme of the statute under which the administrative
power is exercised, the nature and purpose for which the
power is conferred, and the final effect of the exercise of
that power.
31. Chapter VIII of the Master Directions on Fraud provides
detailed procedures to be followed by the banks before
01. WP 1978 of 2023.odt
forming an opinion to proceed with a criminal complaint
against the borrowers. Under the said chapter, the lender
banks have to report a borrower to the CBI after classifying
the borrower's account as fraudulent. However, the
classification of the borrower's account does not simpliciter
lead to reporting of criminal complaint with the
enforcement authorities; it also entails penal consequences
for the borrowers as laid down under Clause 8.12.
32. The process of forming an informed opinion under the
Master Directions on Frauds is administrative in nature.
This has also been acceded to by RBI and lender banks in
their written submissions. It is now a settled principle of
law that the rule of audi alteram partem applies to
administrative actions, apart from judicial and quasi-
judicial functions. It is also a settled position in
administrative law that it is mandatory to provide for an
opportunity of being heard when an administrative action
results in civil consequences to a person or entity.
57. The RBI and the lender banks have contended that the
Master Directions on Frauds impliedly exclude the right to
be heard. The objective of the Master Directions on Frauds
is to ensure timely detection and reporting of cases of fraud
to alert other banks and initiate criminal proceedings. The
Directions contemplate an opportunity of hearing to a third
party who is involved in the commission of fraudulent
activity, but do not explicitly provide for hearing to a
borrower. Thus, it is urged that hearing to the borrowers is
excluded by necessary implication.
58. The Master Directions on Frauds do not expressly
exclude a right of hearing to the borrowers before action to
class their account as frauds is initiated. The principles of
natural justice can be read into a statute or a notification
where it is silent on granting an opportunity of a hearing to
01. WP 1978 of 2023.odt
a party whose rights and interests are likely to be affected
by the orders that may be passed.
71. Audi alteram partem, therefore, entails that an entity
against whom evidence is collected must : (i) be provided
an opportunity to explain the evidence against it; (ii) be
informed of the proposed action, and (iii) be allowed to
represent why the proposed action should not be taken.
Hence, the mere participation of the borrower during the
course of the preparation of a forensic audit report would
not fulfil the requirements of natural justice. The decision
to classify an account as fraud involves due application of
mind to the facts and law by the lender banks. The lender
banks, either individually or through a JLF, have to decide
whether a borrower has breached the terms and conditions
of a loan agreement, and based upon such determination
the lender banks can seek appropriate remedies. Therefore,
principles of natural justice demand that the borrowers
must be served a notice, given an opportunity to explain
the findings in the forensic audit report, and to represent
before the account is classified as fraud under the Master
Directions on Frauds.
85. In light of the legal position noted above, we hold that
the rule of audi alteram partem ought to be read in Clauses
8.9.4 and 8.9.5 of the Master Directions on Fraud.
Consistent with the principles of natural justice, the lender
banks should provide an opportunity to a borrower by
furnishing a copy of the audit reports and allow the
borrower a reasonable opportunity to submit a
representation before classifying the account as fraud. A
reasoned order has to be issued on the objections
addressed by the borrower. On perusal of the facts, it is
indubitable that the lender banks did not provide an
opportunity of hearing to the borrowers before classifying
their accounts as fraud. Therefore, the impugned decision
to classify the borrower account as fraud is vitiated by the
01. WP 1978 of 2023.odt
failure to observe the rule of audi alteram partem. In the
present batch of appeals, this Court passed an ad-interim
order restraining the lender banks from taking any
precipitate action against the borrowers for the time being.
In pursuance of our aforesaid reasoning, we hold that the
decision by the lender banks to classify the borrower
accounts as fraud, is violative of the principles of natural
justice. The banks would be at liberty to take fresh steps in
accordance with this decision. "
Thus, when an entity is to be visited with penal
consequences, what is least expected is an opportunity of filing a
reply and of being heard, as based upon the reply and hearing it may
be found that the case did not merit any further action at all, thereby
resulting in dropping of the proceedings altogether, indicating the
requirement of a pre-decisional hearing, as against a post decisional
hearing, which would amount to putting the cart before the horse.
22. In fact, in Shantilal Lalchand Changede (supra), the
learned Division Bench of this Court, while considering an order of
appointment of an interim liquidator under Section 102(1) of the
MCS Act, has held that the continuation of the society, ought to be
ensured by the Registrar, in the following words:
"14. The co-operative housing societies in Mumbai are
established by the persons so as to facilitate construction of
residential accommodation for them. They are not
established for liquidating. The members are interested in
getting residential accommodation. With such a hope to get
01. WP 1978 of 2023.odt
a home, since 1972 some members and managing
committee members of the Petitioner No. 6 society were
prosecuting the litigation so as to get back possession of the
plot so that it can be developed. This basic object of the
housing society has been overlooked by the respondent No.
1 while passing the order of liquidation. Continuation of the
functioning of the society either at the hands of the
managing committee members or by appointing an
Administrator on the said society so that the activity of the
society can be continued should have been the approach of
the Deputy Registrar. The Deputy Registrars are expected to
see that the co-operative societies remain functional and are
continued instead of liquidating them. Liquidation of the
society is the last resort to be taken by the Registrar, namely,
after having made all efforts and only if the society cannot
be made a functional one or the society is so burdened with
loans that is impossible for the society to repay then only
the Registrar should take the extreme step of liquidating the
society. The approach of the Respondent No. 1 in the
instant case is to the contrary, and it seems the Respondent
No. 1 was in a hurry to appoint a liquidator for reasons
which are not far to seek."
in view of the order of appointment of an interim liquidator, was
quashed and set aside.
23. In Chandrapur Zilla Sahakari Krushi and Gramin
Bahuudeshiya Development Bank Ltd. (supra) the learned Division
Bench of this Court while considering the applicability of the
principles of audi alterem partem, to an action under Section 102(1)
(c) of the MCS Act, categorically held that the applicability of the
01. WP 1978 of 2023.odt
principles of natural justice cannot be dispensed with, in the following
words :
"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
01. WP 1978 of 2023.odt
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."
After considering the issue of pre-decisional hearing it held :
"17. ----------. 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 Art.
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 repercussions 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 ruled 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
01. WP 1978 of 2023.odt
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 pre-
decisional 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 truly
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 order 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
01. WP 1978 of 2023.odt
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
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."
24. A similar position fell for consideration in Dughganga
Sahakari Dudh Utpadak Sangh Maryadit (supra) wherein the learned
Division bench of this Court, considering the plea that there was no
pre-decisional hearing provided for in Section 102(1) of the MCS Act,
01. WP 1978 of 2023.odt
has after considering Chandrapur Zilla Sahakari Krushi and Gramin
Bahuudeshiya Development Bank Ltd. (supra) agreed with what has
been held therein, and has held that the principles of audi alteram
partem have to be read in Section 102(1) of the MCS, having regard
to the consequences that would befall a society against which such an
order has been passed, in the following words :-
"24. Upon thorough consideration of the provisions
contained in section 102 (1)(c) read in conjunction with
section 103 of the Act, we are in respectful agreement with
the views expressed in Chandrapur (supra). Though an order
passed under sub-section (1) of section 102 is termed as an
'interim order', considering the consequences that would
befall a society against which such an order has been passed
having regard to the mandate of section 103 of the Act there
can be no manner of doubt that principles of audi alteram
partem has to be read into in the said provision because an
order passed thereunder entails adverse civil consequences
on the society in question."
25. Thus, two learned Division Benches of this Court, in
Chandrapur Zilla Sahakari Krushi and Gramin Bahuudeshiya
Development Bank Ltd. (supra) and Dughganga Sahakari Dudh
Utpadak Sangh Maryadit (supra) have held that an opportunity of
hearing has to be held to be available to a society against which an
order under Section 102(1) of the MCS Act, is proposed to be passed
for appointment of an interim liquidator.
01. WP 1978 of 2023.odt
26. Clause 6 of the circular dated 23/9/2013, being material
is reproduced as under :
"6) jkT;kr l/;k dk;Zjr vlysY;k ijarq vFkZ{ke ulysY;k T;k
laLFkkaps uDr eqY; m.ks vkgs (Negative Net worth) o tks[khe
laiRrhps HkkaMoyk'kh izek.k (CRAR) 4% is{kk deh vkgs v'kk
izkFkfed d`"kh iriqjoBk lgdkjh laLFkkackcr [kkyhyizek.ks /kksj.k
jkfgy %&
v½ T;k izkFkfed d`"kh iriqjoBk lgdkjh laLFkkaps
uthdP;k laLFksr foyhuhdj.k dj.ks 'kD; vkgs v'kk izkFkfed d`"kh
iriqjoBk lgdkjh laLFkkaps uthdP;k laLFksr foyhuhdj.k dj.;kr
;kos-
c½ T;k laLFkkaps vkfFkZd l{kehdj.k 'kD; vkgs v'kk
laLFkkauh iq<hy rhu o"kkZpk ¼lu 2014&15 rs lu 2016&17½
vkfFkZd l{kehdj.kkpk d`rh dk;Zdze r;kj d#u lacaf/kr
fuca/kdkauk fnukad [email protected]@2014 i;Zar lknj djkok-
T;k laLFkk ofjyizek.ks fnukad [email protected]@2014 i;Zar d`rh
dk;Zdze r;kj dj.kkj ukghr] iq<hy rhu o"kkZr d`rh dk;Zdzekph
vaeyctko.kh dj.kkj ukghr o d`rh dk;Zdzekph vaeyctko.kh
dsY;kuarjgh iq<hy rhu o"kkZr vkfFkZdn`"V;k l{ke gks.kkj ukghr
v'kk laLFkkaps uthdP;k l{ke izkFkehd d`"kh iriqjoBk lgdkjh
laLFkse/;s foyhuhdj.k dj.ks vFkok v'kk laLFkk volk;ukr ?ks.ksckcr
laca/khr fuca/kdkekQZr dkjokbZ dj.;kr ;koh-"
The issuance of the circular dated 23/9/2013, and
specifically clause 6 therein, in fact supports the contention that all
efforts are first necessary to be exhausted such as amalgamation and
01. WP 1978 of 2023.odt
improving the financial health of the society, before passing an order
of liquidation, which is in consonance with what has been held by
the learned Division Bench in Shantilal Lalchand Changede (supra)
as the formation of a Society, is a process which takes a lot of effort
and time on the part of its promotors, which once having been
registered then takes further efforts, time and energy to continue on
the path of fulfilling its aims and objects. The path cannot always be
smooth and there may be instances when the functioning would be
disturbed nay delayed for any number of reasons, however that by
itself cannot lead to a presumption that the society has become
incapable of functioning and has lost its objectives. It is such a
situation which calls for a helping hand to be given to such society,
which the circulars indicate, in order to ensure its revival, rather
than a premature death, leading to all the efforts in creating,
establishing, nurturing and building the society at naught.
Destruction is easy, for it takes no time and little effort, however the
joy of creation, nurturing and building something, inspite of its
trials and tribulations, knows no bounds. The principle of audi
alteram partem, in such circumstances, leads a helping hand to
survival as opposed to destruction and is a principle which has been
01. WP 1978 of 2023.odt
universally applied for ensuring survival. The applicability of the
principles of natural justice at the stage of Section 102(1) of the
MCS Act, is therefore supported by Clause 6 of the circular dated
23/09/2013, for without such opportunity of hearing, the intention
to ensure the survival of the society, by either considering its
amalgamation or financial bolstering as contemplated by clause 6,
cannot be achieved.
27. The principles of statutory interpretation would indicate
that where the literal meaning of a provision would lead to an
incongruity, it must be given a purposive interpretation. Placing a
literal meaning over the language of Section 102(1) of the MCS Act,
would lead to a situation, where the principles of natural justice,
which have a universal applicability, would stand ousted, which
could not have been the intention of the legislature while enacting
Section 102(1) of the MCS Act and therefore in order to
accommodate the principle of audi alteram partem, the provision
will have to be purposefully read to mean that even while exercising
the power under Section 102(1) of the MCS Act, the principles of
audi alteram partem have to be adhered to.
01. WP 1978 of 2023.odt
28. Though reliance has been placed by learned AGP on
Chandrakant Jagannath Ghodke (supra) and on Gadchiroli Zilla
Sahakari Krushi and Gramin Bahu-Udeshiya Development Bank Ltd.
(supra) both of which hold that the provisions of Section 102(1) of
the MCS Act, do not contemplate any pre-decisional hearing before
the passing of an order for appointment of an interim liquidator, it is
however necessary to note that even in these decisions, it has not
been held that the principles of natural justice are not applicable.
What has been held in Chandrakant Jagannath Ghodke (supra) is
that the principles of natural justice have been recognised by
enacting that no final order of winding up would be passed by the
Registrar without affording an opportunity to the society of being
heard (see para 26). Chandrakant Jagannath Ghodke (supra) has
been followed in Gadchiroli Zilla Sahakari Krushi and Gramin Bahu-
Udeshiya Development Bank Limited (supra) reiterating the same
position. What is necessary to note is that the issuance of the circular
dated 23/09/2013, by the State and the subsequent circulars as
stated above, have indicated the stand of the State, to ensure
survival of the societies by granting them an opportunity, to either
amalgamate or to revive by standing on their own legs by infusion of
01. WP 1978 of 2023.odt
financial inputs. This stand changes the contextual background in
which Section 102(1) of the MCS Act, has to be viewed and applied,
for when the State itself intends the survival of the societies, the
subsequent judgments in Chandrapur Zilla Sahakari Krushi and
Gramin Bahuudeshiya Development Bank Ltd. and Dughganga
Sahakari Dudh Utpadak Sangh Maryadit (supra) merely recognise
this by holding that the principles of natural justice are available to
the Societies even at the stage of Section 102(1) of the MCS Act
before the order of appointment of interim liquidator is made. The
judgment of the hon'ble Apex Court in Rajesh Agarwal (supra) in
fact widens the scope and applicability of the principles of natural
justice and therefore must be held to hold the field and sway over
everything. The reliance, therefore, by the learned Assistant
Government Pleader on Pranay Sethi (supra) would not be justified
in view of the change in the scenario, on account of the subsequent
circulars and specifically the one dated 23/09/2013.
29. On the facts of the matter also it has been brought on
record that consequent to the interim order dated 21/02/2023
passed in Writ Petition No.1156/2023 and other connected matters,
the proceedings were adjourned and kept in abeyance by the
01. WP 1978 of 2023.odt
Assistant Registrar, awaiting the final decision. When the writ
petitions were disposed off on 03/03/2023, it appears that in some
cases, no notices were issued which was the need, as no date was
fixed and straight away the order appointing an interim liquidator
came to be passed and in some cases though a date was given no
opportunity of hearing was given. The very fact that before passing
the order appointing an interim liquidator, show cause notices were
issued to the societies on 14/02/2023 and other dates, calling them
to show cause as to why the order of appointment of an interim
liquidator ought not to be made, itself indicates that even the
Assistant Registrar had felt the need to hear the societies before
passing such an order in spite of the material which was available
with him. However later on what prevailed upon him, to deny this
opportunity to the petitioner/societies, remains unexplained.
30. In the instant matters also, if the petitioners are able to
point out material to demonstrate the good financial health of the
society, that may lead to dropping of the proceedings altogether, as
that is the only ground on which the appointment of interim
liquidator is made. To say that such an opportunity, ought not to be
granted and straight away, the interim liquidator is to be appointed,
01. WP 1978 of 2023.odt
would in my considered opinion not sub-serve the rule of law, but on
the contrary would lead to a situation where the provision would
become capable of exploitation, in the hands of officials with
unscrupulous intentions, which can never be said to have been the
intention of the framers of the provisions as such an action would be
an anathema to the rule of law. When the rule of audi alteram
partem, is held to be applicable even to directions issued by the
Reserve Bank of India as held in Rajesh Agarwal (supra) there is no
reason why it cannot be held to be inbuilt in Section 102(1) of the
MCS Act, which provides for penal consequences for the societies,
without even hearing it. I, therefore hold that the rule of audi
alteram partem, is inbuilt in the provisions of Section 102(1) of the
MCS Act, and before passing any order for the appointment of an
interim liquidator, it would be necessary for the Assistant Registrar,
not only to issue a notice to the society, but also grant an
opportunity of being heard to such society, and pass a reasoned
order, only after taking into consideration the reply and supporting
documents which may have been placed before him by the society in
pursuance to such notice.
01. WP 1978 of 2023.odt
31. Section 102(2) of the MCS Act, contemplates hearing to
be given to the society as well as to its creditors. Since it has been
held that the principle of audi alterim partem is applicable to the
society at the stage of passing of an order for appointment of an
interim liquidator under Section 102(1) of the MCS Act, the position
of the creditor, whose monies have been borrowed by the Society
and in turn lent to its members, would be of an entity more
interested in ensuring the well being of the society in order to secure
its monies which are also public monies, in view of which the same
principle would equally be applicable to the creditors of the Society,
as it would be in its interest to see that the society does not go into
liquidation.
32. I, have restricted the consideration in this judgment to
the challenge in respect of the applicability of the principle of audi
alteram partem to proceedings under Section 102(1) of the MCS
Act, as the question whether the requirements of Section 102 (1) of
the MCS Act, were satisfied or not would be a question which would
be required to be addressed on the basis on material which was
available with the respondent no.2, which has not been placed
before me by the respondents and so also material which may be
01. WP 1978 of 2023.odt
placed by the petitioners on record of the respondent no.2, in light
of what has been held that the petitioners are required to be given
an opportunity of being heard. Similarly the question whether there
was a need for amalgamation or financial enforcement in terms of
clause 6 of the circular dated 23/09/2013 is also a question which
needs to be decided by the Assistant Registrar, on the basis of
material as would be available before him and has therefore not
been addressed.
33. However, considering the fact that the order appointing
an interim liquidator by the respondent no.2, dated 15/03/2023 and
other similar orders are under challenge before the Respondent
no.1/ Divisional Joint Registrar in revision, it would be inappropriate
for me to set-aside the same, as that would be the domain of the
respondent no.1. I, therefore while partly allowing these petitions,
set aside the impugned order dated 24/03/2023, passed by the
respondent no.1, refusing to grant stay to the order appointing an
interim liquidator and similar orders passed in all these writ
petitions and direct that order dated 15/03/2023, passed by the
respondent no.2, shall stand stayed till the decision of the revision
01. WP 1978 of 2023.odt
application filed by the petitioners, which shall be decided in light of
what has been said in this judgment.
34. The writ petitions are partly allowed in the aforesaid
terms. Considering the circumstances, there shall be no order as to
costs.
35. All the parties shall appear before the Divisional Joint
Registrar in the respective writ petitions filed by them, on
04/05/2023 without any notices required to be issued to the
petitioners/respondents and place copy of this order before him,
who, after hearing the parties, shall decide the respective revisions
in light of what has been stated in these petitions.
(AVINASH G. GHAROTE, J.)
Rvjalit/Wadkar
