V.K. Mishra And Another vs Central Registrar Of ...
1987 Latest Caselaw 219 Del

JUDGMENT

S.N. Sapra, J.

1. By this petition, filed under article 226 of the Constitution of India, the petitioners seek to challenge the show-cause notice dated July, 14, 1986, issued by respondent No. 1 (Central Registrar of Co-operative Societies) under section 48 of the Multi-State Co-operative Societies Act, 1984. The petition have prayed for the issue of appropriate writ, order or directions calling for the records pertaining to the issuance of the impugned show-cause notice and quashing the same. The petitioners have also claimed the relief of issue of directions to respondent No. 2 to immediately hold elections of the office bearers to the board of directors of respondent No. 3.

2. Originally, civil writ petition was filed by two petitioners, namely, V. K. Misra and Thampan Thomas. After issue of the rule, an application, being C.M. No. 24 of 1987, was moved by Pallipose Thomas and Shambhu Bhai Ballab Bhai Patel, under Order 1, rule 10, read with section 151 of the Code of Civil Procedure for their being imp leaded as petitioners to the writ petition on the ground that these applicants were elected as directors to the board of directors of respondent No. 3 for the time in the elections held on March 21, 1986. Vide order dated January 5, 1987, this application was allowed and the aforesaid two applicants were imp leaded as the petitioners.

3. The National co-operative Consumers Federation of India Ltd., respondent No. 3, is a co-operative society at the national level deemed to have been registered under the provisions of the Multi-State Co-operative Societies Act, (hereinafter called "the Act"), and this is so mentioned national co-operative societies. Respondent No. 3 has been constituted with the aims and objects to assist, aid and counsel its member-constituents and to facilitate their working and also to assist the organisation and promotion of consumer co-operative societies. Some of the other objects of respondent No. 3 as provided in the bye-laws framed by the respondent No. 3 are to render technical guidance and assistance to its member-institutions, in particular, and consumer co-operative societies in general in grading, packaging, standardisation, bulk-buying storing, pricing, account keeping, other business techniques and management methods; to improve and increase their operation and managerial efficiency; establish trade connections with suppliers and manufacturers and other dealers, preferably co-operative organisations and arrange for the procurement and distribution of consumer goods, through its own units, in retail or wholesale, distribution of consumer goods, through its own units, in retail or wholesale, if necessary; import and export of consumer goods and such other articles as will promote international trade.

4. In exercise of the powers conferred by section 109 of the Act, the Central Government has made rules called the Multi-State Co-operative Societies (Registration, Membership, Direction and Management, Settlement of Disputes, Appeal and Revision) Rules, 1985 (hereinafter called "the Rules"). The membership of respondent No. 3 is open to apex level consumer co-operative federations in the States, and State-level co-operative organisations having distribution of consumer goods s one of their objectives, etc. According to the petitioners, the supreme authority of respondent No. 3, i.e., National Co-operative Consumers Federation of India Ltd., vests in the general body of its members, for the purpose of the Act, Rules and bye-laws. The general body of respondent No. 3 consists of one nominee of each member-institution and one nominee each of the Government of India, National Co-operative Union of India and National Co-operative Development Corporation. Respondent No. 3 has a board of directors which at present consists of about 40 members including nominees of the Government of India and one nominee each of National Co-operative Union of India, National Co-operative Marketing Federation of India Ltd. The terms of the board of directors is three years as per bye-law No. 25 of the bye-laws. The petitioners have alleged that as per section 42 of the Act and bye-law 27 of the bye-laws, the board of directors as such is not responsible for the conduct of the day to day business of respondent No. 3. The entire power and responsibility for the conduct of the business of respondent No.3 lies with the managing director/chief executive of respondent No. 3 whose duties are spelt out in section 45 of the Act and bye-law 35 of the bye-laws of respondent No. 3. The election of the directors on the board of directors of respondents No. 3 are held once in every three years, i.e., at the expiry of the term of office of such directors and the same are held in accordance with section 31 of the Act and rules 23 to 28 of the Rules. It has been alleged that the election of the directors to the board of directors of respondent No. 3 was held on March, 21, 1986. According to rule 28 of the Rules, the returning officer, who is respondent No. 2 in this writ petition, was required to hold elections to the office bearers of the board of directors of respondent No. 3 immediately after the election of Directors. However, the meeting was postponed by respondent No. 2 on a day to be notified alter on. Thereafter, respondent No. 2 fixed a meeting on June 11, 1986, for the purpose for the election of the office bearers of the board of directors of respondent No. 3, but the said meeting was postponed, vide telegram dated June 6, 1986, issued by Shri A. K. Aggarwal, managing director of respondent No. 3. Thus, no meeting has taken place so far for electing the office-bearers of the board of directors of respondent No. 3. Suddenly, respondent No. 1 issued a show-cause notice dated July, 14, 1986, under section 48 of the Act to the members of the board of directors of respondents No.3, thereby inviting objection, if any, as to why steps for the supersession of the board of director of respondent No. 3 should not be taken. It is alleged that the aforesaid show-cause notice has been issued on the basis of the report on the working of respondent No. 3 given by shri D. K. Singh, Joint Secretary, Department of Civil Supplies. The petitioner have alleged that the grounds in the show-cause notice are frivolous and false. A reply to the aforesaid show-cause notice has been given by the board of director of respondent No. 3. No. decision has been taken by the Registrar as the petitioner have filed the present writ petition.

5. Shri K. R. Nair, Joint Secretary to the Government of India, Ministry of Agriculture, Department of Agriculture and Co-operation, is the Central Registrar of Co-operative societies, who is respondent No. 1 in the writ petition. He has filed a counter-affidavit to the writ petition. Respondent No. 1 has denied the allegation made by the petitioners in the writ petition as, according to respondent No. 1, the writ petition does not disclose the correct picture of the case. The main objection of respondent No. 1 is that no order adverse to the interests of the petitioners has been passed by respondent No. 1, as only a show-cause notice has been issued and in answer to the show-cause notice, petitioners Nos. 2 and 3, other directors of the board of respondent No. 3, duly authorised on this behalf by the board of the board of respondent No. 3, duly authorised on this behalf by the board of directors, have already submitted a reply and that this reply would be judicially considered and an order passed after proving an adequate opportunity of being heard. According to respondent No. 1, the board of directors of respondent No. 3 consists of 31 members representing its affiliates. At this stage, I need not go into the details given in this affidavit, but it will be sufficient to say that respondent No. 1 has denied the allegations made by the petitioners in the writ petition.

6. To the same effect, a reply affidavit has been filed by respondents No. 3 through Shri. A. K. Aggarwal who is the managing director of respondents No. 3. In this affidavit, the allegations made by the petitioners in the writ petition have also been denied.

7. Mr. Arun Kumar, learned counsel for the petitioners, has submitted that the Central Registrar of Co-operative Societies is appointed by the Central Government under the Act. He has been given various statutory duties and functions under the Act, under section 48 of the Act which relates to the supersession of the board of directors of a Multi-State Co-operative Society, the Central Registrar is bound to form his own opinion and take his own independent decision before issuing a show-cause notice to the board of directors. Section 48 of the Act, according to him, envisages that the Central Registrar will consider materials before him and after applying his mind, may exercise powers under this section. He contends that, in the facts and circumstances of the case, it is clear that there was a total non-application of mind on the part of respondent No. 1 in issuing the impugned show-cause notice. Mr. Arun kumar further contends that respondent No. 1 has issued the impugned show-cause notice under the direction given by the Central Government Learned counsel for the petitioner has invited our attention to the statement made by Shri P. Shiv Shanker, the then Union minister of Food and Civil Supplies, on May 6, 1986, in the Rajya Sabha, in reply to question No. 183. The statement is reproduced as under :

"May I submit that the (Mr. T. P. Singh) does not continue to be the president. In fact, the elections were to be held in March. They have not been held. They were postponed. But he has been elected as a director. But he has been elected. What can we do ?"

8. Again, the Minister replied to another supplementary question of Shri Nirmal Chatterjee that :

"Apart from that, may I bring to the notice of the notice of the House that the statutory authority is the Registrar of Co-operative Societies who has got to supersede. He has been asked,of courses, informally to look into it because, if it is formal, it would be stated that he is being influenced by extraneous matters."

9. According to learned counsel for the petitioners, it was only after the aforesaid statement made by the Union Minister, that the impugned show-cause notice was issued to the newly elected directors of respondent No. 3 even though they had not taken charge of office.

10. Reliance has been placed by learned counsel for the petitioners on the judgment of a Division Bench of the Madras High Court in the case Papanasam Fishermen Co-operative Ltd. v. Collector of Thanjavur, . This case related to the issue of lease or license under the Indian Fisheries Act, 1897, and the rules framed there under. The power to cancel a lease was with the Collector. However, directions were given by the State government to the Collector to cancel the lease, though it was stated that before doing so, the Collector should issue a show-cause notice to the appellant in that case. It was held that as the power to cancel the lease or license vested in the Collector, it was only the Collector who could take an independent decision and could not act upon the directions of the Government (at page 83) :

"We then pass on to a consideration of the impugned orders of the Collector. There are two matters which immediately arise for consideration. One is the direction of the Government to the Collector to cancel the lease. This obviously was irregular and the Government ought not to have issued such instruction to the Collector. The power to cancel was with the Collector. The fact that the Government while making the direction asked the Collector to issue a show-cause notice to the appellant, would only be paying lip service to the requirement of the principles of natural justice, for the Government's direction went further that the Collector, after cancellation of the license of the appellant, should grant it to the third respondent. In the circumstances, the Collector would be in a very embarrassing position. The Collector's order merely said that the elaborate explanation of the appellant was unsatisfactory. This is not surprising. It is obvious that that was not compliance with the requirement of the principles of natural justice. We do not agree with Mr. V. P. Raman that, because a show-cause notice was served on the appellant, the latter submitted an explanation, and the same was considered by the Collector, there was compliance with the principles of natural justice. The compliance should be a substantial one, that is to say, it should be not merely in form : the opportunity given must be complete, reasonable and adequate which includes also that, when an explanation is submitted by the person who was asked to show-cause, the authority concerned should apply its mind to the explanation and not merely say that it is unsatisfactory. Also once the orders of the Collector are subject to a review by this court under article 226 of the Constitution, the non-speaking order of the Collector does not show its reasonableness or compliance with the principles of natural justice."

11. Learned counsel for the petitioners has also relied on the judgment of the supreme Court in the case Purtabpur Co. Ltd. v. Cane Commissioner of Bihar . This case related to the power of the Cane Commissioner under clause 6(1) of the Sugar Cane (Control) Order, 1966. In this case, for two seasons, i.e., 1964-65 and 1965-66, the Cane Commissioner. Bihar, while exercising his power under the aforesaid clause, reserved certain villages in favor of appellants. This was challenged in the High Court. Both parties made representations to the Chief Minister and the Cane Commissioner. The Cane Commissioner recommended to the Chief Minister against interfering with the reservation order made by it. However, the Chief Minister directed the Cane Commissioner to divide the area into two portions and allot one portion to the firth respondent. On the basis of this direction, the Cane Commissioner made the orders which were challenged by the appellant in the High Court which held that the Cane Commissioner had the power to modify or cancel the reservation. In appeal, their Supreme Court held that the impugned orders, though purported to have been made by the Cane Commissioner, were in fact made by the Chief Minister and as such the same were invalid. The power exercisable by the Cane Commissioner under clause 6(1) of the order of the Sugar Cane Control Order, 1966, was a statutory power which could be exercised only by him.

12. Learned counsel for the petitioner has argued that there was a total non-application of mind by respondent No. 1 before issuing the impugned show-cause notice and that the respondent No. 1, has carried out the directions given to him by the Union Minister by means of the statement made by him, in Rajya Sabha on May 6, 1986. On the other hand, the learned Additional Solicitor-General of India, appearing for the respondents, No. 1 after careful consideration of the alleged lapses and negligence on the part of the management of respondent No. 3 and after considering the other relevant materials before him. He further submits that no help can be derived by the petitioners from the statement made by Mr. Shiv Shanker in the Rajya Sabha on May 6, 1986. A simple reading of the statement shows that there was no direction given by the Government of India and it was accepted that the Registrar is the statutory authority under the Act and it was for the Registrar to act in the matter.

13. In my view, the facts of the aforesaid judgment were different from the facts of the present case. A deep perusal of the statement made by Shri Shiv Shanker shows that in fact he was very careful and conscious and, therefore, he stated that the Registrar of Co-operative Societies was the statutory authority in the matter and that he had been asked informally to look into the matter. He has further stated that if the Central Registrar had been asked formally, then it would be said that he had been influenced by extraneous matters. It appears that on account of various allegations and the report submitted by the Joint Secretary with regard to the functioning of respondent No. 3, questions were raised in Parliament. The Union Minister was under an obligation to reply to the same. He was right in saying that the Central Registrar of Co-operative societies had been informally asked to look into the matter. Rather he makes it clear that the Central Registrar could not be asked formally because the Central Registrar of Co-operative Societies is the statutory authority under the Act and it was for the Registrar to take an independent decision. It is the only meaning which is derived from the aforesaid statement. I do not agree with learned counsel for the petitioners that there was non-application of mind on the part of respondent No. 1 in issuing the impugned show-cause notice. On the contrary, respondent No. 1 has taken an independent decision and has formed an independent opinion on the basis of the materials before him before issuing the impugned show-cause notice. My view, respondent No. 1 issued the show-cause notice on the basis of material and facts available and in the discharge of his statutory duties and functions.

14. The next contention made by learned counsel for the petitioners is that the impugned action is wholly fide. The first point on the mala fides raised by learned counsel for the petitioners is that election of the office-bearers of the board of directors of respondent No. 3 has already been postponed twice in spite of the mandate contained in rule 28 of the Rules, According to him, respondent No. 1 is interest in ensuring that certain persons are elected as office-bearers or that certain persons do not come as office-bearers and so long as this result is not ensured, respondent No. 1 is keeping on postponing the elections of office-bearers. On the point of mala fides, his further submission is that from the parliamentary debates, it appears that the Government is pre-determined to supersede the board of directors of respondent No. 3 and appoint its own administrator and that the impugned show-cause notice is only an eye-wash and for completing the procedural formally. In this behalf learned counsel for the petitioners has again invited our attention to the statement made by the Union Minister on May 6, 1986. According to counsel, this shows that the issue has already been prejudged and that respondent No. 1 has no choice in the matter and that he is bound to issue the order regarding supersession of the board of directors of respondent No. 3. Reliance has been placed on the decision of the Division Bench of the Kerala High Court in Jose Kuttiyani v. Registrar of Co-operative Societies, . This case relates to the Kerala Co-operative Societies Act. It appears that on receipt of the report the Enquiry Officer that certain irregularities of serious nature existed in the working of Idikki District Co-operative Central Bank Ltd., the Registrar did not independently try to assess the facts and even without hearing the principal of the committee seems to have taken a firm decision to supersede the committee and accordingly issued a show-cause notice. It was held that the Registrar was not keeping an open mind either to consider the reply of the petitioners or the opinion of the apex bank and state co-operative union. Thus, it was held that the Registrar was, from the beginning, very much biased against the members of the committee and he was not in a mood to consider the whole matter regarding the allegations against the members of the committee in a partial manner Learned counsel for the petitioners has again submitted that the statement of the Union Minister in the Rajya Sabha on May, 6, 1986, shows that the decision had already been taken and respondent No. 1 had already decided to supersede the board of directors of respondent No. 3 and he is biased against the members of the present board of directors. The arguments of Mr. Arun Kumar are without any force. Rule 28 of the Rules provides that as soon as the members of the Board have been elected, the returning office referred to in sub-rule 1 of rule 27 or the person presiding over the general meeting, as the case may be, shall convene a meeting of the duly elected members of the Board for the purposes of election of the president/chairman/vice president/vice chairman or other elected office-bearers of the society. No doubt it is provided that this meeting may be called as soon as the members of the board have been elected. In the counter-affidavit filed by respondent No. 1, it is stated that the returning officer could not conduct the election of the office-bearers as per the provisions of rule 28 of the Rules, since there were many issues regarding the eligibility of some directors who continued on the board of directors of respondent No. 3. Some of the directors, according to respondent No. 1, who were not eligible to remain or continue as directors on the board according to the provisions of the Act, continued on the strength of stay orders issued by the High Court. To resolve these matters, respondent No. 2 required some time and as such the elections of the office-bearers could not he held.

15. The fact of the case are quite different from the facts of the present case. Learned counsel for the petitioners cannot derive any help from the statement made by the Union Minister in the Rajya Sabha. In my view, this statement has not influenced the decision of the Registrar to issue the show-cause notice Moreover, very serious allegation have been made in the report submitted by Shri Singh after a thorough statutory inspection of the working of respondent No. 3. In the show-cause notice itself, respondent No. 1 has stated that on the basis of the report of inspection on the working of respondent No. 3 given by Shri D. K. Singh, Joint Secretary, Department of Civil Supplies, and also on the basis of the material furnished by the Department of Civil Supplies, he was of the opinion that the present state of affairs of respondent No. 3 was due to faults and negligence on the part of the board in not discharging the functions imposed on it by the Act, rules and bye-laws of respondent No. 3. Respondent No. 1 has also filed an affidavit and has categorically stated that there were no mala fides on his part. In my view, there is no material on the record to suggest that either respondent No. 1 has already prejudged the matter or that the wants to ensure that his own persons are elected or that he is biased against the members of the present board of directors of respondent No. 3. There are no mala fides on the Government or respondents Nos. 1 and 3.

16. Learned counsel for the petitioners has further contended that the allegations contained in the show-cause notice at best concern the previous board of directors of respondent No. 3, which has ceased to exist. Therefore, according to him, no action can be taken against the present newly elected board on the basis of the allegations against the previous board. The members of the board have ceased to hold office, upon the election of their successors on March 21, 1986, and, therefore, the "sins" if any, of the previous board cannot be visited upon the present newly constituted board. According to learned counsel for petitioners, section 48(1) of the Act enumerates various grounds which may attract action on the part of the Central Registrar for superseding the board of directors of multi-State co-operative societies. None of the grounds, as contained in section 48(1) of the Act, are attracted in the present case against the present board of directors of respondent No. 3. The board which is sought to be superseded by the impugned show-cause notice does not come under the purview of section 48(1) of the Act. Mr. Arun Kumar argues that the present board of directors has not even met once and even the office bearers of the board of directors have not been elected. Therefore, there is no question of any persistent default or negligence in performance of its duty by the present board. According to him, the impugned show-cause notice does not come under the purview of section 48(1) of the Act.

17. Learned counsel for the petitioners submits that the terms of office of the directors and the board of directors of respondent No. 3 is for a period of three years and at the expiry of this period, the board of directors ceases to exist. In the present case, he submits that the new board of directors has been constituted by virtue of the election held on March 21, 1986. As such, no action on account of any defaults on the part of the directors of the previous board of directors can be taken against the present board of directors or any of its members.

18. Mr. Arun kumar has also contended that the board of directors is not responsible for the day-to-day business of respondent No. 3. In fact, the business affairs of respondent No. 3 are entirely in the hands of the managing director of respondent No. 3 who is a whole time paid employee. The board of directors cannot be made a scapegoat for the faults/defaults of the chief executive managing director of respondent No. 3.

19. The learned Additional Solicitor-General of India has contended that the board of directors of respondent No. 3 has been created by statute unlike the board of directors under the Companies Act. He argues that as the board of directors comes into existence by virtue of the provisions of the Act, so in law, the board of directors is continuing.

20. The learned Additional Solicitor-General has submitted that whether it is a new board or not, is not a relevant consideration. In fact, it is the misconduct of the members of the board of directors which is a relevant consideration. The learned Additional Solicitor-General has further contended that the board of directors of respondent No. 3 has not ceased to exist but is continuing as this is a creation of statute. He has contended that the managing director of respondent No. 3 functions under the supervision and guidance of the board of directors. In fact, all the powers and functions of respondent No. 3 vest in the board of directors. The board of directors as a body is responsible for the state of affairs of respondent No. 3. According to him, the Act does not provide for fixing the responsibility and taking action against any individual member/director but against the board of directors.

21. With a view to properly appreciate the submissions made by learned counsel for the parties, it will be useful to reproduce the relevant provisions as contained in the Act and the bye-laws. The relevant provisions of the Act are reproduced as under :

"3(a). 'board' means the board of directors or the governing body of a multi-State co-operative society by whatever name called, to which the direction and control of the management of the affairs of the society entrusted;

29(2). Subject to the provisions of this Act, the rules and the bye-laws, the ultimate authority of a multi-State co-operative society shall vest in the general body of its members :

Provided that nothing contained in this sub-section shall affect the exercise by the board or any officer of a multi-State co-operative society of any power conferred on such board or such officer by this Act or the rules or the bye-laws.

32. Board of directors. - Subject to the provisions of this Act and the rules, there shall be a board of directors for every multi-State co-operative society consisting of such number of members as may be provided for under the bye-laws.

35(3). The terms of office of the elected members of the board shall be such, not exceeding three years from the date of elections, as may be specified in the bye-laws of a multi-State co-operative :

Provided that the elected members shall continue to hold office toll their successors are elected or nominated under the provision of this Act or the rules or the bye-laws and assume the charge of their office.

41. Nominee of Central Government or State Government on the board. - (1) Where the Central Government or a State government has subscribed to the share capital of a multi-State co-operative society or has guaranteed the repayment of principal and payment of interest on debentures issued by a multi-State co-operative society or has guaranteed the repayment of principal and payment of interest on loans and advances to a multi-State co-operative society, the Central Government or the State Government in this behalf, as the case may be, or any person authorised by the Central Government or the State Government, or the State Government, shall have the right to nominate on the board such number of persons as may be prescribed.

(2) The bye-laws of a multi-State co-operative society may provide for the nomination of persons in excess of the limit prescribed under sub-section (1).

42. Powers and Functions of the board. -(1) The board may exercise all such powers as may be necessary or expedient for the purpose of carrying out its functions this Act.

(2) without prejudice to the generality of the foregoing power, such power shall include the power -

(a) to admit members;

(b) to interpret organisational objective and set up specific goals to be achieved towards these objectives;

(c) to make periodic appraisal of operations;

(d) to appoint a chief executive and such other employees of the society (out of the list of persons referred to in section 50) as are not required to be appointed by the chief executive;

(e) to make provisions for regulating the appointment of employees of the multi-State co-operative society and the scales of pay, allowances and other conditions of service of including disciplinary action against such employee;

(f) to approve the annual and supplementary budget;

(g) to acquire or dispose of immovable property;

(h) to raise funds;

(i) to sanction loans to the members; and

(j) to take such other measures or to do such other acts as may be prescribed or required under this Act.

44. Chief executive. (1) There shall be a chief executive, by whatever designation called, of every multi-State co-operative society, to be appointed by the board and he shall be a full time employee of such multi-State co-operative society.

(2) The chief executive shall be a member of the board and of the executive committee and such other committees or sub-committee as may be constituted under sub-section (1) of section 46.

(3) The functional directors in national co-operative societies shall also be members of the board.

(4) Where the Central Government has subscribed to the extent of more than one-half of the share capital of a national co-operative society, it shall be obligatory on such to seek prior approval of the Central Government to the appointment of the chief executive and the functional directors.

45. Powers and function of chief executive. - The chief executive shall exercise the powers and discharge the functions, specified below, namely :-

(a) day-to day management of the business of the multi-State co-operative society;

(b) operating the accounts of the multi-State co-operative society and be responsible for making arrangement for safe custody of cash;

(c) signing on the documents for and on behalf of the multi-State co-operative society;

(d) making arrangements for the proper maintenance of various books and records of the multi-State co-operative society and for the correct preparation, timely submission of periodical statements and returns in accordance with the provisions of this Act, the rules and the bye-laws;

(e) convening meeting of the general body of the multi-State co-operative society, the board and the executive committee and other committee or sub-committee constituted under sub-section (1) of section 46 and maintaining proper records for such meetings;

(f) making appointments to posts in the multi-State co-operative society in accordance with the rules made under clause (e) of sub-section (2) of section 42 except the posts in relation to which the power of appointment vests in the board under clause (d) of that sub-section;

(g) assisting the board in the formulation of policies and objective and planning;

(h) furnishing to the board periodical information necessary for appraising the operations and functions of the multi-State co-operative society;

(i) performing such other duties, and exercising such other powers as may be prescribed or as may be specified in the bye-laws of the multi-State co-operative society.

48(1). Supersession of board. - (1) If in the opinion of the Central Registrar the board of any multi-State co-operative society is persistently making default or is negligent in the performance of the duties imposed on it by this Act or the rules or the bye-laws or has committed any act which is prejudicial to the interests of the society or its members, or has omitted or failed to comply with any directors given to it under section 47 or there is a statement in the constitution or function of the board, the Central Registrar may, after giving the board an opportunity to state its objections, if any and considering the objections, if received, by order in writing, remove the board and appoint one or more administrators, who need not be members of the society, to manage the affairs of the society for such period not exceeding one year, as may be specified in the order, which period may, at the discretion of the Central Registrar, be extended, from time to time; so, however, that the aggregate period does not exceed two years."

"52. Multi-State co-operative society to be body corporate. - The registration of a multi-State co-operative society shall render it a body corporate by the name under which it is registered having perpetual succession and a common seal, and with power to hold property, enter into contract, institute and defend suits and other legal proceedings and to do all things necessary for the purposes for which it is constituted."

Rule 32 of the Multi-State co-operative Societies Rules, 1985, reads as under :

"32. Additional measures and acts to be undertaken by the board. - The board may take any of the measures or do any of the acts mentioned below as may be necessary or expedient for the purposes of carrying out its functions under the Act and the rules made the there under :

(i) placing before the general body the annual report and the audit report;

(ii) recommending the distribution of profits to the general body;

(iii) taking decision on matters relating to withdrawals, transfer, retirement, refund or forfeiture of shares;

(iv) purchasing, selling or otherwise acquiring or disposing of movable property of such value as may specified in the bye-laws;

(v) laying down criteria for determining defaults by members;

(vi) determining the terms and conditions of collaboration with other co-operative societies and others;

(vii) sanctioning of contracts of any values, unless otherwise specified in the bye-laws of a multi-State co-operative society;

(viii) appointment of trustee or trustees, attorney or attorneys, agent or agents for the business of the Multi-State co-operative society;

(ix) acceptance or rejection of resignation from the members of the board."

The relevant provisions of the bye-laws of the national Co-operative Consumers Federation of India Ltd., respondent No. 3, read as under :-

"Bye-law No. 25. - The terms of the board of directors shall be three years provided that a director shall continue to hold office till his successor is nominated by the members-institutions authorised to nominate such successor. All members of the board of directors including those elected/nominated in casual vacancies, whether representing the member institution or who are members of the board in any other capacity shall vacate the respective officers on the same day which their successors are elected/nominated irrespective of the date on which they were elected as members of the board.

Bye-law No. 27. - The board shall exercise all the powers of the federation except those reserved for the general body and in particular. shall have the following powers and duties :

(i) to observe, in all their transactions, the Act, rules and these bye-laws.

(ii) to admit members and allot shares.

(iii) to authorise convening of meeting of the general body.

(iv) to place before the general body the annual report and audit report.

(v) to decide on share contribution in other co-operative and other enterprises.

(vi) to recommend to the general body the distribution of profits.

(vii) to prepare and lay before the general body the programme of work for the ensuing year.

(viii) to fill any vacancies in the board by co-option.

(ix) to consider the inspection notes of the Registrar or of any other person authorised on his behalf and take necessary action.

(x) to decide matters relating to withdrawals, transfers, refunds and forfeiture of shares.

(xi) to frame rules for election of directors.

(xii) to accept or reject resignation from the members of the board of directors.

(xiii) to appoint, suspend, punish and dismiss the managing director provided that suspension, punishment, dismissal and reversion of managing director appointed on deputation from Government or other institutions would be government by the terms and conditions of deputation.

(xiv) to authorise person or persons to sign on behalf of the federation, bills, notes, receipts, endorsements, cheques, contracts and documents.

(xv) to appoint an agent or agents for his business.

(xvi) through any member or officer or employee of the federation or any person specially authorised to institute, conduct, defend, compromise refer to arbitration or abandon legal proceedings by or against the federation or the board or officers or employee concerning the affairs of the federation.

(xvii) to frame regulations regarding recruitment, scales of pay, promotions, training and conditions of employees of the federation.

(xviii) to sanction posts for the administration of the federation.

(xix) to delegate all or any of the powers, authority and discretion vested in the board to the managing director or other employees or executive committee or other committee subject to the ultimate control being retaining by the board.

(xx) to arrange for safe custody of books and records and the property of the federation and to maintain them in a good state and where necessary to arrange for their insurance.

(xxi) to determine terms and conditions of collaboration with co-operative and others in India and abroad.

(xxii) to settle the terms and conditions regarding retirement of share capital contribution by the Government of India.

(xxiii) to appoint from amongst its own members the executive committee and other committee for efficient conduct of business. The committee shall in the discharge of the functions entrusted to them conform in all respect to these bye-laws and to the instructions given by the board. The deliberations and decisions of the committee shall be subject to review by the board.

(xxiv) to construct, purchase or otherwise acquire godowns, trucks, machinery or other property considered necessary for carrying out the business of NCCF and enter into contract for the purpose.

In the conduct of the affairs of the federation, the board of director shall exercise the prudence and diligence of an ordinary man of business and shall be responsible for any loss sustained through acts contrary to the Act, the Rules, and these bye-laws.

Bye-law No. 34(b)(i) : The managing director shall act as the chief executive officer of NCCF and shall conduct the business of the federation and shall exercise control over the administration of NCCF, subject to the overall control of the president.

Bye-law No. 35 : Power and duties of the managing director :

(i) to summon the meeting of the general body, board of directors, executive committee, business committee and other committees, with the approval of the president and under the instructions of the president or in his absence the vice-president authorised to carry out the functions of the president by common consent or resolution of the board of directors for the purpose and participate in them but shall have no right to vote.

(ii) to attend meetings of the different committees and implement the decisions taken in various meetings.

(iii) to be responsible for the general conduct, supervision and management of the day-to-day business and affairs of NCCF.

(iv) to receive all money and securities on behalf of NCCF and to arrange for the safe custody of cash, records, properties and other securities of NCCF.

(v) to assist in the inspection of the books and records by various authorities empowered to do so under the Act, Rules and bye-laws."

22. From a perusal of the relevant provisions as contained in the Act, Rules and bye-laws, it is clear that the composition of the board of directors and its powers and functions have been clearly defined. Similarly, the powers of the managing director have also been defined, There is no manner of doubt that all the important powers and functions of respondent No. 3 vest in the board of directors. Under bye-law No. 34(a), the managing director is required to act as the chief executive officer of respondent No. 3 and shall conduct the business of the federation and shall exercise control over the administration of respondent No. 3 subject to the overall control of the president I do not agree with the arguments advanced by learned counsel for the petitioners that the board of directors is not responsible for the conduct of the business of respondent No. 3. From the aforesaid provisions, it appears that the chief executive, i.e., the managing director is responsible for conducting the day-to-day business of respondent No. 3, but the managing director functions under the general supervision and control of the board of directors and has to execute the policies of the board. Bye-law No. 27 of the bye-law of respondent No. 3 provides that the board of directors shall exercise all the powers relating to administration, business, functions, etc.

23. No, doubt, section 32 of the Act provides that subject to the provisions of the Act, and the rules framed there under, there shall be a board of directors for every multi-State co-operative society consisting of such number of members, as may be provided for under the bye-laws. There are provisions in the Act for disqualification of a members of the board. But still, it cannot be said that the board of directors of respondent No. 3 has been created by the statue, though there is a statutory requirement contained in the Act to the effect that there shall be a board of directors for every multi-State co-operative society consisting of such number of members may be provided for under the bye-laws. Section 35 of the Act provides for the election of members of the board of directors of multi-State co-operative societies. Sub-section (1) of section 35 lays down that the superintendence, director and control of the preparation of the electoral rolls and the conduct of elections of the members of the board of such multi-State co-operative societies or class of multi-State co-operative societies as the Central Government may, by general or special order, notify, shall be vested in such returning officers as may be appointed by the Central Registrar. However,sub-section (3) of section 35 of section 35 of the Act provides that the term of office of the elected members of the board shall be such, not exceeding three years from the date of elections, as may be specified in the bye-laws of a multi-State co-operative society. It is subject to the proviso that the elected members shall continue to hold office till their successors are elected or nominated under the provisions of the Act or the Rules or the bye-laws and assume charge of their office.

24. Rule 28 of the Rules relates to the election of the office bearers of the board of directors of a multi-State co-operative society. IT lays down that as soon as the member of the Board has been elected, the returning officer shall convene a meeting of the newly elected members of the board for the purpose of election of the president/chairman, vice-president/vice-chairman or other elected office-bearers of the society by whatever name they are called Bye-law 25 of the bye-laws of respondent No. 3 lays down the terms of the board of directors, i.e., three years, provided that a directors shall continue to hold office till his successor is nominated by the member-institutions authorised to nominate such successor. It is thus clear from the foregoing provisions relating to the election and terms of the directors on the board of directors of a directors of a multi-State co-operative society and also the board of directors of respondent No. 3 that the term of office of the board of directors is three years. AT the expiry of the term elections to elect the new directors on the board of directors of respondent No. 3 were held on March 21, 1986.

25. With regard to the contention of learned counsel for the petitioners that as the previous board has ceased to exist, the impugned show-cause notice under section 48(1) of the Act could not be issued by respondent No. 1 as the present board is not responsible or liable for the acts or omissions on the part of the previous board of directors, learned Additional Solicitor-General of India has submitted that two-thirds of the members/directors of the previous board of director have been now elected on the board of directors by virtue of the election held on March 21, 1986. According to him, out of 31 members of the board of directors representing State federations and affiliated societies, as many as 20 members have been on the board of directors over the past several years, and as such they could not be absolved of the responsibility for various lapses and losses in respondent No. 3. He contends that the matter is of paramount public interest and only a show-cause notice has been given by respondent No. 1 in exercise of his show-cause section 48 of the Act on the basis of relevant materials before him. A reply to the show-cause notice has been filed by the present board of directors of directors and the same will be considered by respondent No. 1 which is a quasi-judicial body.

26. Before, dealing with contentions, it will be appropriate to give in brief the material facts which are relevant for considering the contentions made by learned counsel for parties Mr. D. K. Singh, Joint Secretary in the Ministry of Food and Civil Supplies, submitted a report dated May 8, 1985, of the statutory inspection of the working of respondent No. 3. This statutory inspection was ordered by respondent No. 1 in exercise of his powers under the Act.

27. The principal object of respondent no. 3, which was established in 1965, as a national level apex body of consumer co-operative movement in the country is to assist, aid and counsel its member-constituents and to facilitate their working and also to assist the organisation and promotion of consumer co-operative societies. At the end of June, 1984, the total paid-up share capital amounted to Rs. 475.04 lakhs of which the contribution of dealing mainly in grocery, tea, general merchandise, controlled cloth and non-control textiles, confiscated goods and import and export of consumer goods Mr. D. K. Singh has taken great pains in giving details with respect to all possible aspects of the business of respondent No. 3, its capital, profits and losses annually. The following conclusions have been reached by Mr. singh in his aforesaid report :

"Conclusion : The board conclusion which emerged form the foregoing paragraphs is that the NCCF has, with its wide net work of branches and regional offices, established itself firmly as a national level organisation for the consumer co-operative in the country and enlisted financial and administrative support from the Government and trade support from the national level trading organisation, but has to go a long way to prove as an effective and efficient institution to achieve its aims and goals. It is suffering from operational deficiencies such as over-dependence on sheltered business, increasing operational costs disproportionate to sales, lack of systems and procedures for its purchases and sales, under-utilisation of capacity of industrial units ect. In particular, there is no codified procedure for procurement and purchases of commodities to follow, the expenditure on staff DA and DA has been increasing unreasonably (sic); there is absence of proper stock control and laxity in collection of over dues. As a result, the viability of the Federation has become marginal and its financial soundness is at stake. In short, the organisation is suffering from serious administrative and financial maladies."

28. It is thus clear that respondent No. 3 has been enriched to a great extent from the financial and administrative support from the Government and trade support from the national level trade organisation. Thus, huge public money is involved in the business of respondent No. 3. In the impugned show-cause notice, respondent No. 1 has given in brief the lapses and acts of negligence on the part of the board of directors of respondent No.3 and on account of which heavy have been caused to respondent No. 3 and there has also been deterioration in its working. For example, on account of the negligence on the management, the impugned show-cause notice says, the organisation, i.e., respondent No. 3, had suffered a loss of Rs. 1.20 crores in 1983-84 and Rs. 1.45 crores in 1984-85. According to the available trends, respondent No. 3 is likely to incur further heavy losses during the year 1985-86. In the show-cause notice, serious allegations have been made. It is a state of show-cause notice issued by respondent No. 1 to the directors of the board of directors of respondent No. 3. Unless it is shown convincingly by the petitioner that the impugned show-cause notice is without jurisdiction and it outside the purview of section 48(1) of the Act, it will not be appropriate for this court to interfere. I am of the view that the petitioners have failed to show that the impugned show-cause notice is without jurisdiction. On the contrary, the totality of facts and circumstances suggests that respondent No. 1 was acting within its jurisdiction in exercise of its power under section 48(1) of the Act. There was sufficient and relevant material before respondent No. 1 to take a decision in issuing the impugned show-cause notice. It also appears that respondent No. 1 has been acting in the interest of the business of respondent No. 3. To the show-cause notice, the board of directors of respondent No. 3 has already filed a reply. Respondent No. 1 is a statutory authority under the Act and acts as a quasi-judicial Tribunal under section 48(1) of the Act. The petitioners and the other members of the board can raise their contentions before respondent No. 1. At present, no order adverse to the interest of the interest of the petitioners or other members of the board of directors of respondent No. 3 has been passed by respondent No. 1. I agree with the arguments of the learned Additional Solicitor-General of India that the matter is of public importance and this is not a stage to interfere with the proceedings initiated by respondent No. 1 by issuing the impugned show-cause notice. the fact that 2/3 rds of the members of the previous board are also members of the newly elected board of directors cannot be ignored altogether. This matter has also been the subject of debate. However, it is for respondent No. 1 to take an independent decision after giving an opportunity of being heard to the petitioners and other members of the board of directors and decide the case on merits.

29. Section 90 of the Act and rule 37 of the Rules provide for an appeal to the Secretary to the Government of India in the Department of Agriculture and Co-operation against the order of the Central Registrar. If any order adverse to the interests of the petitioner/board of directors is passed by respondent No. 1, then the alternative remedy will be available to the petitioners and other members of the board of directors by way of appeal,as mentioned above. The present writ petition is premature.

30. In view of the facts and circumstances as mentioned above, the writ petition is dismissed. However, the parties are left to bear their own costs.

S.S. Chadha, J.

31. I agree.