Smt. Sheela Wati vs Registrar Cooperative ...
2006 Latest Caselaw 1557 Del

JUDGMENT

Hima Kohli, J.

1. The present writ petition has been filed by the petitioner praying, inter alia, for quashing and setting aside the letter dated 27th June, 2001 issued by the office of the respondent No.1/Registrar, Cooperative Societies (for short `the RCS') revoking the clearance of membership in respect of Mr. Ajay Kumar Gupta, respondent No.4 herein, conveyed vide earlier letter dated 11th January, 1999 for allotment of a plot by the respondent No.2 society (hereinafter referred to as `the respondent society') on the basis of the transfer of membership allowed by the respondent society vide resolution dated 30th April, 1978 and for declaring the petitioner to be a bona fide purchaser and owner of plot No.B-31, Ashoka Niketan, Delhi. The reason stated in the letter dated 27th June, 2001 for revocation of the membership of respondent No.4 was that the original member, one Mr. L.C.Gupta, a relative of the respondent No.4, from whom the membership was transferred in favor of respondent No.4 was holding dual membership contrary to and in violation of the provisions of the Delhi Cooperative Societies Act, 1972 and Delhi Cooperative Societies Rules, 1973.

2. The brief facts of the case, as admitted by both the parties, are that one Mr. L.C. Gupta was the member of Preet Nagar Cooperative House Building Society Ltd. Vide membership No.81, he was allotted plot No. 124, Preet Vihar, New Delhi. While continuing to be a member of the aforesaid society, Mr. L.C. Gupta also became a member of the society vide membership No.133 with effect from 14th December, 1965 and he continued to be a member till 30th April, 1978. In the meanwhile, Mr. L.C. Gupta and his nephew, respondent No.4 approached the society with a request to transfer his membership in favor of the respondent No.4. Along with the request, he and respondent No.4 filed affidavits to the effect that they did not own any other plot or house in Delhi either in their names or in the names of their spouses and dependent children. Accordingly, the respondent society transferred the membership of Mr. L.C. Gupta in the name of his nephew, i.e. respondent No.4 which was also approved by the RCS and respondent No.3/DDA. As a result, respondent No.4 was allotted plot No.B-31, Ashoka Niketan, Delhi, measuring 166.66 sq.yards in a draw of lots held on 25th May, 1999. This was followed by execution of a perpetual Sub-lease deed dated 26th November, 1999 in favor of respondent No.4. Subsequently, a vigilance enquiry was initiated and as a result of the said enquiry, it was revealed that Mr. L.C. Gupta was holding dual membership of two house building societies, as stated hereinabove. Consequently, the impugned letter dated 27th June, 2001 was addressed by the RCS to respondent No.3 pointing out the violation of Rule 28 of the Delhi Co-operative Societies Rules, 1973 (for short `the Rules') which prohibits dual membership and revoking the clearance of membership in respect of the respondent No.4.

3. In January, 2000, prior to the issuance of the impugned letter dated 27th June, 2001, the petitioner purchased the aforesaid plot No. B-31, Ashoka Niketan, Delhi from respondent No. 4 for a consideration of Rs. 3,50,000/-. The petitioner has also stated that necessary documents relating to transfer of the plot were executed by respondent No. 4 in favor of the petitioner which included a general power of attorney and a Will and that possession of the plot was in fact handed over by respondent No.4 to the petitioner, pursuant to which the petitioner approached the MCD for obtaining an `NOC' for the purposes of sanction of building plans. The petitioner further stated that pursuant to the plot in question being assessed for the purposes of property tax by the MCD, the petitioner also deposited property tax and transfer duty vide receipts dated 4th September and 6th September, 2001 respectively. The counsel for the petitioner further submitted that the petitioner came to know about the revocation letter dated 27th June, 2001 issued by the RCS only by letter dated 24th September, 2001 addressed to her by respondent No.4 and immediately thereafter, she filed the present writ petition, in which vide order dated 29th October, 2001, status- quo as to possession was directed to be maintained.

4. The writ petition has been opposed by RCS, DDA as well as the respondent society. Counter affidavits have been filed by all the respondents. The respondent society has contested the writ petition on the ground that the petitioner had purchased the plot in question from respondent No.4 in an illegal manner and against the terms and conditions of the perpetual sub-lease dated 26th November, 1999 executed between the President of India as the Lesser and the respondent society as the lessee and respondent No.4 as the sub-lessee and that the said purchase is also in violation of Rule 28 of the Rules which imposes a prohibition on membership in two cooperative societies of the same class, as also bye-law 51 of the respondent society which prohibits any member from transferring, selling, or mortgaging the plot to any person other than the member of the respondent society itself.

5. On the other hand, the stand of respondent No.4 is that Mr. L.C. Gupta, original allottee of the membership of the respondent society, had legally and validly transferred his membership in favor of respondent No.4 with the prior consent of the respondent society as also approval of the RCS and that there was no justification on the part of the RCS to issue the impugned letter dated 27th June, 2001, which is per se illegal and void and that as the RCS had failed to issue a show cause notice and has failed to call upon respondent No.4 to putforth his case, its action of revoking of his membership was without just cause or reason.

6. We have heard the learned Counsels for the parties. We have also perused the records placed on the file. At the outset, it may be necessary to advert to the relevant provisions of law as well as the relevant bye-laws of the respondent society so as to examine the case as set up by both the parties.

7. Rule 24 of the Rules lays down the conditions to be complied with for admission to membership. For our purposes, Rule 24 (1) (iii) is relevant which is in the following terms:

24. Conditions to be complied with for admission to membership

1. No person shall be admitted as a member of a co-operative society unless:

(i) xxx

(ii) xxx

(iii) he has fulfillled all other conditions laid down in the Act, the Rules and the Bye-laws.

8. Rule 25 lays down the conditions for disqualification as a member of a cooperative society. For the purposes of present writ petition, we may refer to the second proviso of Rule 25(1)(c)(i) which has been substituted by the Notification dated 6th August, 1997, and Sub-rule (2) thereof reproduced hereinbelow:

25. Disqualification for membership

1. No person shall be eligible for admission as a member of a co-operative society if he-

(a) xxx

(b) xxx

(c) in the case of membership of a housing society:

(i) owns a residential house or a plot of land for the construction of a residential house in any of the approved or un-approved colonies or other localities in the National Capital Territory of Delhi, in his own name or in the name of his spouse or any of his dependent children, on lease hold or free-hold or on power of attorney or on agreement for sale:

Provided that disqualification of membership as laid down in Sub-rule (1)(c)(i) shall not be applicable in case of co-shares of property whose share is less than 66.72 sq. meters of land:

Provided further that the said disqualification shall not be applicable in case of a person who has acquired property on power of attorney or through agreement for sale and on conversion of the property from leasehold to freehold on execution of conveyance deed for it, if such person applies for the membership of the housing society concerned.

2. Notwithstanding anything contained in the rules or the bye-laws of the cooperative society, if a member becomes, or has already become, subject to any disqualifications specified in Sub-rule (1), he shall be deemed to have ceased to be a member from the date when the disqualifications were incurred.

9. Rule 28 of the Rules prohibits any individual or primary society from taking membership in two co-operative societies of the same class. The said Rule is reproduced below:

28. Prohibition on Membership in Two Co-operative Societies:

No individual/primary society, being a member of a primary co-operative society/federal society of any class shall be a member of any other co-operative society of the same class without the general or special permission of the Registrar, and where an individual/primary society has become a member of two co-operative societies of the same class, either or both of the co-operative societies shall be bound to remove him from membership after giving proper opportunity to such individual/primary society in writing. The individual/primary society shall, however, have the right to appeal to the Registrar against the order of the society within thirty days after the receipt of the order of the termination of membership. The decision of the Registrar shall be final and binding on all concerned.

10. Rule 34(a) was inserted in the Rules vide Notification dated 6th August, 1997 which lays down the conditions when membership of a co- operative housing society may be transferred. The same states as under:

34 a. When Membership of a Co-operative Housing Society may be transferred

Without prejudice to the provisions of the Act and these rules and bye-laws of the society, the membership of a member of a Co-operative Housing Society may be transferred to a person who has acquired free-hold rights in respect of a property related to such membership in that society:

Provided that in the intervening period till a person acquires free-hold rights of the property, the rights of the original member shall remain suspended in the society without prejudice to the mortgage charge of the financing institution, if the original member has raised loan for the property.

Provided further that the above provision shall become operative immediately on intimation of the said transaction by the transferee to the committee of the concerned society and the Registrar for which due acknowledgment of the receipt of the communication shall be obtained by the transferee:

Provided also that the Registrar, every year shall fix and notify the transfer fee to be paid by the transferee to the society, the money so received shall be part of ?Common Good Fund? for the society and also be utilised only for common purposes, for which a separate account shall be maintained by the concerned society.

11. Rule 40 of the Rules deals with cessation of membership of a co-operative society which states as below:

40. Cessation of Membership Without prejudice to the provisions of Section 27, a person shall cease to be a member of a co-operative society on his resignation from the membership there of being accepted or on the transfer of the whole of his share or interest in the society to another member, or on his death, removal or expulsion of incurring any of the disqualifications specified in the Act and the Rules.

12. Bye-law 5(i) (d) stipulates the criteria of the eligibility to be a member of the society. For the purposes of present writ petition, bye-law 5 (i) (d) is relevant which states as below:

5.(i) Any person shall be eligible to be a member of the society provided-

(a) xxx

(b) xxx

(c) xxx

(d) he is not a member of any other house building society.

13. Bye-law 50 of the bye-laws of the respondent society stipulates as under:

50. In case any member does not want to construct a house over the plot the same will be returned to the society. Provided that a member may subject to the condition of the lease, mortgage his interest in the plot for the purpose of raising loan for construction of a house on the said plot to the L.I.C.of India, a scheduled bank or a Financial Institution recognised by Govt.of Delhi State.

14. Bye-law 51 of the bye-laws of the respondent society states as below:

51. No member shall be permitted to transfer, sell or mortgage his plot to any person other than the members of the society or the society itself. ?Provided that a Member may subject to the condition of lease, mortgage his interest in the plot for the purpose of raising loan for the construction of a house on the said plot to the Life Insurance Corporation of India Scheduled Bank or a Financial Institution recognised by the Government of Delhi State.

15. Clause 6(a) of the perpetual sub-lease dated 26th November, 1999 executed in favor of respondent No.4 reads as under: ? 6 (a) The Sub-Lessee shall not sell, transfer, assign or otherwise part with the possession of the whole or any part of the residential plot in any form of manner, benami, or otherwise, to a person who is not a member of the Lessee.?

16. From a perusal of the aforesaid provisions of law and the relevant Rules and bye-laws, what emerges is that Mr.L.C.Gupta was admittedly, in the first instance, a member of the Preet Nagar Housing Building Society. He was allotted a plot by the said society. Without revealing the said fact, Mr.L.C.Gupta applied for membership of the respondent society and thereafter, on the strength of affidavits and documents submitted by him, got the same transferred in favor of respondent No.4, who in turn, was allotted said plot in question and only after the report of the vigilance enquiry conducted by the RCS revealed the aforesaid facts, that clearance of membership in respect of respondent No.4 cleared vide letter dated 11th January, 1999 was revoked by the RCS vide letter dated 27th June, 2001 addressed to respondent No.3 and endorsed to the respondent society.

17. It is, therefore, apparent that in the first instance, Mr. L.C. Gupta grossly violated Rules 24, 25 and 28 of the Rules by concealing material information about his already existing membership in respect of another co-operative house building society of the same class. On account of the facts staring on the face, he was disqualified to be a member of the respondent society. Thus, he became liable to be removed from the membership of the respondent society. Additionally, respondent No.4 violated the provisions of bye-laws 50 and 51 of the respondent society which clearly stipulated that no member could transfer, sell etc.his plot to any person other than a member of the respondent society, or to the respondent society itself and that in case a member does not want to construct a house over the plot, the same was liable to be returned to the respondent society.

18. Furthermore, as per clause 6 (a) of the perpetual sub-lease dated 26th November, 1999 executed in favor of the respondent No.4, not only did he have no right to sell, transfer, assign or otherwise part with the possession of the whole or any part of the the plot in question in any manner whatsoever to a person who was not a member of the lessee, i.e. the respondent society in terms of clause 6(b) of the aforesaid sub-lease, respondent No.4 was not entitled to sell, transfer or otherwise part with possession of the plot even to any other member of the respondent society without the previous written consent of the Lesser.

19. Admittedly, in the present case, the petitioner is not a member of the respondent society, she has not approached the respondent society seeking its membership and no prior permission was sought for by respondent No.4 from the respondent society before transferring the aforesaid plot in question to the petitioner in accordance with the stipulations laid down in the bye-laws of the respondent society and in the perpetual sub-lease deed. It is also apparent that in terms of Rules 24, 25 and 28 of the Rules, disqualification for membership was attracted by Mr.L.C.Gupta, the original member of the respondent society, who withheld material information from respondents No.1 to 3 and also filed false affidavits to the effect that he was not a member of any other house building society of the same class as that of the respondent society.

20. Once it came to the knowledge of the RCS that Mr.L.C.Gupta was a member of another society and was already allotted a plot by that society, there was good and sufficient reason to declare the membership of Mr.L.C.Gupta as invalid and void abinitio and as a consequence thereof, the subsequent transfer of membership by Mr.L.C.Gupta in favor of respondent No.4 was also automatically revoked. As the membership of respondent No.4 itself stood revoked, there is no question of recognizing the rights, if any, of the petitioner in the plot in question as the same only flow from the rights, if any, that were vested with respondents No.1 and 4.

21. The grievance of petitioner to the effect that she was not given any opportunity to challenge the show cause notice before issuance of the impugned letter, is of no consequence in view of the fact that the said grievance, if any, could be made by Mr.L.C.Gupta and/or respondent No.4 and not by the petitioner. Neither of the two parties, namely, Mr.L.C.Gupta or respondent No.4 have vented such a grievance by filing any proceeding or petition in any forum. If at all the right to impugn the letter dated 27th June, 2001 for want of issuance of show cause notice was available, the same was available to Mr.L.C.Gupta and/or respondent No.4 and not to the petitioner.

22. We also find merit in the submission made on behalf of the respondent society that the alleged transfer of the plot in question in the records of the MCD does not vest the petitioner with any proprietary rights. We may also note that no special equities, can flow in favor of the petitioner by mere deposit of property tax and transfer duty with the MCD, particularly so, when the same were deposited by the petitioner, in the month of September, 2001, after issuance of the revocation letter dated 27th June, 2001. Furthermore, as per the guidelines and the applicable rules, only built up properties could be converted from leasehold to freehold by the DDA and the said rules were not applicable to plots of land.

23. Under the relevant provisions of the Rules as also the bye-laws of the respondent society, the petitioner cannot be held to be a lawful and valid owner of the plot in question and in view of the revocation of the clearance of the membership of respondent No.4 by the RCS, the documents executed by respondent No.4 in favor of the petitioner for transferring the plot in question are without any force of law, as the entire transaction is hit by the provisions of the Rules 25 and 28 of the Rules. The mere possession of the petitioner in the plot will not vest in her any lawful rights.

24. In this regard, we would like to refer to a judgment rendered by the Supreme Court in the case of Jagdish Singh v. Lt.Governor, Delhi and Ors. reported as , wherein, after extracting the provisions of Rules 24, 25 and 28, it has been held as below:

A conjoint reading of the aforesaid provisions would make it clear that Rule 24 provides the conditions to be complied with by a person for being admitted as a member of a cooperative society. Rule 25 enumerates the disqualifications of a person for becoming a member of a cooperative society. Sub-clause (c)of Rule 25(1) deals with the disqualifications of a person in case of a housing society, clause (iii) of Rule 25(1) (c)provides that if the said person or his spouse or any of his dependent children is a member of any other housing society then he cannot become a member of another housing society unless permitted by the Registrar. Sub-rule (2) of Rule 25 provides for a deemed cessation of a member in the event that member incurs any of the disqualifications mentioned in Sub- rule (1) of Rule 25 with effect from the date of such disqualification. Sub- rule (4) of Rule 25 confers power to decide a dispute as to whether a member has incurred any of the disqualifications referred to in Sub-rule (1). Rule 28 of the Rules confers power on the Registrar directing removal of an individual from membership of either or both of the cooperative societies when such individual has become a member of two cooperative societies of the same class. The short question that arises for consideration is whether a person who is a member of a housing cooperative society having incurred the disqualification under Rule 25(1)(c)(iii) on being a member of a subsequent housing society would cease to be a member of both the societies with effect from the date of the disqualification incurred by him. It is a cardinal principle of construction of a statute or the statutory rule that efforts should be made in construing the different provisions, so that, each provision will have its play and in the event of any conflict a harmonious construction should be given. Further a statute or a rule made there under should be read as a whole and one provision should be construed with reference to the other provision so as to make the rule consistent and any construction which would bring any inconsistency or repugnancy between one provision and the other should be avoided. One rule cannot be used to defeat another rule in the same rules unless it is impossible to effect harmonisation between them. The well known principle of harmonious construction is that effect should be given to all the provisions, and therefore, this Court has held in several cases that a construction that reduces one of the provisions to a dead letter is not a harmonious construction as one part is being destroyed and consequently court should avoid such a construction. Bearing in mind the aforesaid rules of construction if Sub-rule (2) of Rule 25 and Rule 28 are examined the obvious answer would be that under Sub-rule (2) the deemed cessation from membership of the person concerned is in relation to the society pertaining to which disqualifications are incurred. A plain reading of Rule 28 makes it crystal clear that the Registrar when becomes aware of the fact that an individual has become a member of two cooperative societies of the same class which obviously is a disqualification under Rule 25 then he has the discretion to direct removal of the said individual from the membership of either or both the cooperative societies.

x x x

In this view of the matter the only way by which Sub-rule (2) of Rule 25 and Rule 28 can be harmoniously construed is to construe Sub-rule (2) to Rule 25 to mean that the deemed cessation of the person concerned from the membership of the society is the society in respect of which the disqualification was incurred.

x x x

Apart from the aforesaid harmonious construction of Sub-rule (2) of Rule 25 and Rule 28, on a plain construction of Rule 25 also the same conclusion has to be arrived at. Sub-rule (1) disqualifies a person for admission as a member of the housing society if he or his spouse or any of his dependent children is a member of any other housing society. The disqualification in question obviously attaches to membership of the second society and has no connection with his membership of the first society.

25. Applying the aforesaid principles to the facts of the case in hand, it is quite apparent that Mr.L.C.Gupta intentionally failed to disclose his dual membership in two societies at the same time, thus violating the provisions of Rules 25 and 28 of the Rules. As a result, he ceased to remain a member of the respondent society in terms of Rule 40 of the Rules. It is not as if the RCS cancelled both the memberships of Mr.L.C.Gupta. He only removed him from the membership of the respondent society as he was already a member of Preet Vihar cooperative society. Therefore, by operation of Sub-rule (2) of Rule 25 readwith Rule 28, Mr.L.C.Gupta was deemed to have ceased to be a member of the respondent society right from the inception i.e. with effect from 14th December, 1965. As a result of the disqualification incurred by Mr.L.C.Gupta, in relation to the respondent society, the subsequent transfer of his membership in favor of respondent No.4 also stood automatically revoked.

26. The petitioner cannot claim the benefit of Rule 34(a) inasmuch as the property in question is not a built up property but only a plot of land which, as per the rules and guidelines of the DDA, cannot be converted into freehold. In any case, as already stated by the DDA in its counter affidavit, pursuant to the letter of revocation letter dated 27th June, 2001, the DDA has also cancelled the allotment of the plot in question and hence there is no question of the petitioner having acquired any lawful right in the plot in question. Even after purportedly purchasing the plot in question in January, 2000, the petitioner did not intimate the respondent society and the RCS of the said transaction. It does not lie in the mouth of the petitioner to claim that the RCS could not cease something which did not vest with him. As the membership of Mr.L.C.Gupta, the original member itself has been declared to be in violation of Rule 28 of the Rules, being tainted by fraud, all the subsequent chain of events by way of transfers stand vitiated. Thus the claim of the petitioner to the plot of land cannot be recognized by law.

27. It is well settled that fraud vitiates every solemn act. It has been held in a number of cases by the Supreme Court and the High Court that when fraud has been practiced, then all consequences flowing there from stand revoked. This aspect of the matter has been considered and reiterated by the Supreme Court in the following judgments:

(i) Gowrishankar v. Joshi Amba Shankar Family Trust .

(ii) Roshan Deen v. Preeti Lal .

(iii) Ram Chandra Singh v. Savitri Devi .

(iv) Ram Preeti Yadav v. U.P.Board of High School and Intermediate Education and Ors. .

(v) Bhaurao Dagdu Paralkar v. State of Maharastra and Ors. .

(vi) Bank of India and Anr. v. Avinash D. Mandivikar and Ors. .

(vii) State of A.P. v. T. Suryachandra Rao (2005) 5 Scale 621.

28. It has been stated in the case of Ram Chandra Singh (supra) as below:

Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letters or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letters. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knowns to be false, and injury ensues there from although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata.

29. The conduct of Mr. L.C .Gupta, in submitting false affidavits to the respondent society, who in turn, relying on the same, forwarded his case to the RCS for transfer of his membership in favor of his relative, respondent No.4 herein, was clearly fraudulent. Any action taken by the RCS on such a false representation, is vitiated and thus the status acquired by respondent No.4 on the basis of such a fraud has also to be unravelled, which is what was done by the RCS, by virtue of the impugned letter dated 27th June, 2001. The plea of the petitioner that much water has flown under the bridge since and the clock cannot be permitted to be put back, cannot be allowed.

30. In this view of the matter, we do not find any merit in the present writ petition which is rejected. In so far as the plot of land in question is concerned, in view of the fact that the DDA has already cancelled the allotment of the plot on the basis of the letter of revocation issued by the RCS, the same shall vest with the respondent society. It will only be just, fair and appropriate to direct the respondents to take possession of the plot of land and initiate steps to allot the same to the members in the wait-list of the respondent society, in accordance with seniority, in case, such a list is not drawn, as per law, at the current market rate of land in the area.

31. No order as to costs. dusty.