Delhi High Court
H.D. Gupta vs Lt. Governor Of Delhi & Ors. on 6 April, 2010
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 23.02.2010
% Judgment delivered on: 06.04.2010
+1. W.P. (C) No.3639/1991
H.D. GUPTA .....Petitioners
Through: Mr. O.P. Gupta & Ms. Neha
Gupta, Advocates
versus
LT. GOVERNOR OF DELHI & ORS. ....Respondents
Through: Mr. Sudhir Nandrajog, Senior
Advocate with Mr. J.N. Gupta,
Advocate for respondent Nos.3,
6 & 8.
Mr. Devender Kumar, Advocate
for respondent No.6
AND
2. W.P.(C) 3625/1991
SITA RAM BANSAL ..... Petitioner
Through: Mr. O.P. Gupta & Ms. Neha
Gupta, Advocates
versus
LT. GOVERNOR OF DELHI & ORS. ..... Respondents
Through: Mr. Sudhir Nandrajog, Senior
Advocate with Mr. J.N. Gupta,
Advocate for respondent Nos.3,
6 & 8.
Mr. Devender Kumar, Advocate
for respondent No.6
W.P.(C) No.3639/1991 Page 1 of 41
AND
3. W.P.(C) 3626/1991
URMIL MITTAL ..... Petitioner
Through: Mr. O.P. Gupta & Ms. Neha
Gupta, Advocates
versus
LT. GOVERNOR OF DELHI & ORS. ..... Respondents
Through: Mr. Sudhir Nandrajog, Senior
Advocate with Mr. J.N. Gupta,
Advocate for respondent Nos.3,
6 & 8.
Mr. Devender Kumar, Advocate
for respondent No.6
AND
4. W.P.(C) 3638/1991
DARSHNA DEVI ..... Petitioner
Through: Mr. O.P. Gupta & Ms. Neha
Gupta, Advocates
versus
LT. GOVERNOR OF DELHI & ORS. ..... Respondents
Through: Mr. Sudhir Nandrajog, Senior
Advocate with Mr. J.N. Gupta,
Advocate for respondent Nos.3,
6 & 8.
Mr. Devender Kumar, Advocate
for respondent No.6
CORAM:
HON'BLE MS. JUSTICE GITA MITTAL
HON'BLE MR. JUSTICE VIPIN SANGHI
1. Whether the Reporters of local papers may No
be allowed to see the judgment?
2. To be referred to Reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
W.P.(C) No.3639/1991 Page 2 of 41
JUDGMENT
VIPIN SANGHI, J.
1. These four writ petitions arise out of a common order
dated 28th August, 1991 passed by the Lt. Governor of Delhi in the
four appeals preferred by the aforesaid petitioners under Section 76
of the Delhi Co-operative Societies Act, 1972 (for short the `Act')
against the comon order of expulsion dated 16th May, 1990 passed
by the Registrar of Co-operative Societies in respect of each of the
petitioners. Since the relevant facts and the issues arising in all
these petitions are identical, and we have heard learned counsel for
the petitioners and the respondents, we proceed to dispose of these
petitions by a common judgment.
2. The petitioners before us were enrolled as members of
Sukhdham Co-operative Group Housing Society Ltd situated at plot
No.1, Sector-9, Rohini. The membership numbers of these
petitioners were as follows: -
Petitioner's Name Membership Number
3. During the course of their membership, the respondent
society raised demands on its members including the petitioners to
fund the construction activity of the residential flats. The
petitioners opted to part finance their flats by taking loans from the
Delhi Cooperative Housing Finance Society Ltd. (DCHFC). The
amounts stated to have been deposited by these petitioners with
the respondent society, from time to time were as follows: -
Sh. H.D.Gupta Rs. 78,100/-
Smt. Darshna Devi Rs. 58,100/-
Sh. Sita Ram Bansal Rs. 63,100/-
Smt. Urmil Mittal Rs. 71,100/-
4. The aforesaid amounts were claimed to have been
deposited, apart from the amounts released by the Delhi Co-
operative Housing Finance Society Ltd. in the account of these
petitioners as loan.
5. It appears that the respondent society issued demand
notices to each of these petitioners raising demands for varying
amounts stated to be due from them, from time to time. The
petitioners, however did not make payments of the amounts
demanded from them by the respondent society. Eventually the
respondent society issued notices to each of these petitioners on
14.01.1989 by registered post under Rule 36 of the Delhi
Cooperative Societies Rules, 1973 ("the Rules" for short) to initiate
action against them for expulsion from membership of the
respondent society on account of their default in not making
payments due from them. Each of these notices referred to
demands raised by the society on 24.9.1988, 7.1.1988 and
30.12.1988 which had not been complied with by these petitioners.
The amounts demanded from these petitioners in the individual
notices dated 14.01.1989 were as follows:-
Sh. H.D.Gupta Rs. 16,000/-
Smt. Darshna Devi Rs. 36,000/-
Sh. Sita Ram Bansal Rs. 31,000/-
Smt. Urmil Mittal Rs. 23,000/-
6. The respondent society required the petitioners to submit
their explanation for not being expelled from the membership of the
society on or before 29.01.1989. It was also informed that the
General Body Meeting, to consider their cases for expulsion, would
be held on 29.01.1989 at 11 a.m.
7. It appears that the respondent-society approached the
Registrar of Co-operative Societies for approval of the expulsion of
the petitioners. The Registrar of Co-operative Societies heard the
parties on 05.10.1989, and passed a common order on or about
09.10.1989 (forwarded to the petitioners vide forwarding letter
dated 11.10.1989).
8. From the order passed by the Registrar, it appears that
each of the petitioners expressed their willingness to pay the
amounts demanded from them as set out hereinabove. At the
same time it was represented by the respondent society that on
account of the default of these petitioners, the financing institution,
namely, DCHFS had deducted the amount due to be released in the
account of these four petitioners from the total loan amount
disbursed at the time of release of the second instalment in May
1989. It was further claimed by the respondent society that the
individual loans in respect of these four members may be released
by DCHFS along with the release of the third instalment in favour of
the society. The respondent society had also submitted that these
four petitioners should initially pay the entire amount, including the
amount of second instalment of loan from DCHFS, from their own
resources till the amounts were released in respect of the four
petitioners from DCHFS.
9. It appears that in this background the parties mutually
agreed that the respondent society would immediately write to
DCHFS requesting them to release the amount. The petitioners
were held liable to pay the interest on the loan instalment amounts
till the time the same are released by the DCHFS. At the same time
the claim of interest by the society at the rate of 12% per annum on
the outstanding dues for the period 01.08.1988 to 31.08.1989 was
held as not supported by any resolution passed by the Managing
Committee and also because the society had not charged interest in
any other case. The Registrar directed the petitioners to pay the
following amounts:-
Name Balance outstanding as
on 31.7.88
Sh. H.D. Gupta Rs.16,000
Sh. Sita Ram Bansal Rs.31,000
Smt. Darshana Devi Rs.36,000
Smt. Urmil Mittal Rs.23,000
10. The petitioners were also directed to pay interest on the
first and second instalments of loan till such time the same was got
released from DCHFS. The society was directed to immediately
write to DCHFS for release of the loan amount and the society was
directed to send copies of all such communications to the
petitioners. The society was also required to indicate the amount
payable as interest on the two loan instalments from DCHFS and to
communicate the same to the petitioners within one week from the
issue of the order. The petitioners were granted fifteen days time to
pay the aforesaid amounts together with interest on DCHFS loan
amount.
11. It appears that none of the petitioners made payment of
the aforesaid amounts within the period of fifteen days as granted
by the order of the Registrar. It is also the admitted position that
the respondent society, which was directed to immediately write to
DCHFS to release the loan amounts i.e. the first and second
instalments in respect of these petitioners, did not do the needful
and did not even communicate the amount of interest on the loan
amounts (i.e. first and second instalment) to the petitioners within a
week of the passing of the aforesaid order by the Registrar.
12. The petitioners being aggrieved by the aforesaid order
passed by the Registrar, preferred appeals before the Lt.Governor
by invoking Section 76 of the Act. These appeals were dismissed as
withdrawn by the Lt. Governor on 24.05.1990 as being premature,
on the ground that the petitioners had not been expelled by the
Registrar of Co-operative Societies while passing the aforesaid
order.
13. According to the petitioners, they were shocked when they
were suddenly visited with identical orders dated 16.05.1990 with
regard to approval of their expulsion from membership of the
respondent society with immediate effect, on the ground that they
had failed to deposit the defaulted amounts within the 15 days
period granted by the Registrar by his aforesaid order.
14. The petitioners preferred appeals against the orders dated
16.5.1990 before the Lt. Governor, Delhi under Section 76 of the
Act, and as aforesaid, the Lt. Governor dismissed the said appeals
being appeal nos. 113/90-C.A., 121/90-C.A., 122/90-C.A., 123/90-
C.A. and 124/90-C.A. by the impugned order dated 28.08.1991.
15. The present writ petitions came up before the Court on
22.11.1991. While issuing Rule nisi the Division Bench directed that
in the meantime, the respondents would not enrol any new member
in place of the petitioners.
16. The writ petitions were thereafter adjourned from time to
time to grant opportunities to the respondents to file their counter
affidavits. The respondent society filed identical counter affidavits
in all the four petitions. In their counter affidavit filed in January,
1992 the respondent society disclosed that after the expulsion of
the four petitioners had been approved by the Registrar on
16.05.1990, the managing committee of the society had resolved to
enroll 4 new members in its meeting held on 31.10.1990.
Accordingly, the following four members were enrolled:
(i) Smt. Varsha Rani, wife of Shri Jeet lal;
(ii) Sh. Devender Kumar, s/o of Shri Tara Chand;
(iii) Smt Nirmal Garg, wife of Shri Ram;
(iv) Sushil Kumar Parikh, s/o of Shri Sita Ram Parekh
17. Consequently, the petitioner in W.P.(C) No.3626/1991 i.e.
Smt. Urmil Mittal, preferred C.M.No.3108/92 under Order 6 Rule 17
read with Section 151 C.P.C to appropriately amend the writ petition
for the purpose of impugning the enrollment of the said four
members in place of the petitioners and also to implead them as
party respondents. Notice of the said application was issued to the
proposed respondents who even filed their reply dated 21.04.1983.
The said application for amendment was considered by this Court
on 26.04.1993 and after hearing the counsels for the respondent-
society, the proposed respondents and the Registrar of Co-operative
Societies, the said application was allowed. Accordingly, the said
newly enrolled members were impleaded as party respondents in
the said writ petition and were granted time for filing their counter
affidavits. We may note that the said newly added respondents 5 to
8 [in W.P.(C) No.3626/1991] have, however, preferred not to file
their counter affidavits on record.
18. In each of these writ petitions, the petitioners preferred
applications u/s 151 C.P.C to seek a restraint against the respondent
society from making allotment of flats to its members till the
disposal of the writ petitions. While orders were passed in
C.M.No.1975/94 in W.P.(C) No.3638/91 and C.M. No.1973/94 in
W.P.(C) No.3626/91 on 15.3.1994 directing that the draw of lots, if
any held, shall be subject to the final outcome of the application,
the same order was passed in C.M. No.1992/1994 in W.P.(C)
No.3639/1991 on 16.03.1994. It appears that though the petitioner
in W.P.(C) No.3625/91 had preferred C.M. No.1974/94, at the same
time, no formal order came to be recorded in the said case. These
orders continue to operate till date.
19. The submissions of learned counsel for the petitioners, Mr.
Gupta are as follows:-
(i) It is firstly submitted that the respondent society
did not comply with the mandatory provisions of
Rule 36 of the Rules framed under the Act. He
submits that the show cause notice dated
14.01.1989 was issued by the respondent society
by registered post and the same was received in
the next couple of days. The General Body
meeting was, however, fixed for 29.01.1989
thereby not granting sufficient time to the
petitioners either to respond to the notice or even
to make payment of the amounts claimed by the
respondent society as being the defaulted
amount. He submits that under Rule 36(2), the
meeting could not have been held "earlier than
the period of one month from the date of such
notice". He, therefore, submits that the
mandatory procedure prescribed under Rule 36
has been violated and the expulsion proceedings
were void ab initio.
(ii) Mr. Gupta further submits that even on 29.1.1989,
no resolution was passed by the General Body of
the respondent society to expel the petitioners
from their primary membership of the society. He
submits that the so-called resolution, which was
required to be passed by a majority of not less
than 3/4th of the members entitled to be present
and vote at the general meeting, and which
purported to expel the petitioners, had not seen
the light of the day. No such resolution was ever
placed before the Registrar of Co-operative
Societies and none has been placed before this
Court. In this regard, he specifically draws our
attention to the averment made in para 3 of the
writ petition to the effect that in the General Body
Meeting held on 29.01.1989, no resolution for
expulsion was passed and that the only resolution
passed was that some more time be given to the
petitioners to deposit their dues. He also refers to
the corresponding reply given by the respondent
society wherein the respondent society states that
in the said meeting held on 29.01.1989, it was
unanimously resolved that in case the defaulters
deposit the amount within fifteen days, the same
may be accepted, otherwise they be treated as
expelled from the membership of the society. He
submits that despite the specific plea raised by
the petitioners, the respondent had not produced
before this Court the resolution passed in the
General Body meeting held on 29.01.1989.
(iii) The third submission of Mr. Gupta is that even
before the Registrar, when the matter was taken
up for hearing on 05.10.1989, the Registrar did
not grant approval to the resolution for expulsion
purportedly passed by the respondent society. He
submits that the petitioners had agreed to make
payment of the aforesaid amounts as set out in
para 5 hereinabove on account of the false
representation made by the two representatives
of the respondent society i.e Shri Tara Chand and
Shri Hem Raj Bansal, to the effect that the DCHFS
had not released the first and the second
instalments of the loan amounts in the accounts
of the four petitioners. It was on this
representation that the petitioners had agreed to
pay the interest for the period the first and the
second instalments had not been released in
respect of the petitioners. He submits that after
the passing of the order by the Registrar of Co-
operative Societies, the petitioners had
approached the DCHFS to enquire about the
amounts, if any, released in their account. The
DCHFS had provided the relevant information to
each of these petitioners vide communication
dated 11.10.1989 with regard to the sanction and
release of the amounts in the respective accounts.
The information disclosed by the DCHFS in this
regard, in respect of each of these petitioners is
as follows: -
S. Name Loan Loan released
No. sanctioned first Second
1. Mr. H.D. Gupta Rs.1,00,000.00 25,000 38,000
2. Ms. Darshana Rs.80,000.00 21,000 31,000
Devi
3. Mr. Sita Ram Rs.80,000.00 21,000 31,000
Bansal
4. Ms. Urmil Rs.1,00,000.00 25,000 38,000
Mittal
(iv) Mr. Gupta further submits that in the
communications sent to Smt. Darshana Devi
(petitioner in W.P.(C) No.3638/1991) and Smt.
Urmil Mittal (petitioner in W.P.(C) No.3626/1991),
the dates on which the amounts had been
released by the respondent society towards the
first and second instalments had also been
indicated as 18.10.1988 and 17.05.1989 i.e. even
prior to the date of hearing before the Registrar
i.e. 05.10.1989. He submits that the stand taken
by the respondent society that the loan amounts
in respect of the petitioners had not been
released when the amounts in respect of the other
members were released by the DCHFS was,
therefore, palpably false and misleading. In any
case the respondent also did not communicate
the amounts payable in terms of the order dated
09.10.1989 of the Registrar. He submits that it
was on these accounts' that the petitioners did
not pay the amounts indicated in para 5 above.
(v) In support of his aforesaid submission, Mr. Gupta
relies on the specific averments made in para 5 of
the grounds urged in the writ petitions and the
response thereto given by the respondent society.
He submits that the respondent society had not
denied the fact that the first and the second
instalments of the loans sanctioned in respect of
each of the petitioners had, in fact, been released
by the DCHFS in the normal course. He submits
that the respondent society had sought to give a
patently false explanation by stating as follows:
"The facts of the case are that the Delhi
Group Housing Finance Society Ltd had
released the second instalment only
because the Joint Registrar Cooperative
Societies while granting time to the
petitioner to deposit the dues within 15
days asked the society to get the loan
instalment also released from the
Finance Society but when the petitioner
failed to deposit the amount as directed
by the Joint Registrar the Finance
Society adjusted the amount of
instalment of the society."
(vi) Mr. Gupta submits that, in any event, there was
no justification for the respondent society to take
action for expulsion of the petitioners as they had
deposited substantial amounts, apart from the
loan instalments released by the DCHFS Ltd. In
support of this submission he points out that in
respect of other members, who had paid
comparable or much lesser amounts no action
was taken by the respondent society to expel
them.
(vii) The next submission of Mr. Gupta is that, in any
event, before the Registrar of Co-operative
Societies the approval of expulsion did not come
about when the Registrar passed the order dated
09.10.1989, which was forwarded to the
petitioners on 11.10.1989. He submits that the
expulsion proceedings, in any event, stood
dropped and instead the Registrar granted fifteen
days time to the petitioners to make payment of
the amounts indicated hereinabove while
directing the respondent society to take
immediate steps for release of the first and the
second instalments of the loan amounts, under
intimation to the petitioners. He submits that
even if it were to be assumed that there was any
default on the part of the petitioners on account of
the non-payment of any amounts under the order
passed by the Registrar, the same gave a fresh
cause of action to the respondent society to
initiate expulsion proceedings in accordance with
law. There was no condition attached in the order
passed by the Registrar to the effect that the
expulsion of the petitioners would stand approved
if the petitioners did not comply with the orders of
the Registrar. He submits that in the order dated
09.10.1989, there is not a whisper of any
discussion regarding the validity and justifiability
of the so-called expulsion proceedings, and the
same shows that there was no application of mind
by the Registrar to the so-called expulsion
proceedings, as the parties apparently proceeded
to diffuse the situation by undertaking to take
steps according to the Schedule filed by the
Registrar. He submits that this position is further
fortified by the fact that the appeals preferred by
the aforesaid petitioners before the Lt. Governor
against the order passed by the Registrar dated
09.10.1989 were dismissed as withdrawn being
premature, as the Lt. Governor also appreciated
the fact that the Registrar had not granted
approval to the expulsion of the petitioners. Mr.
Gupta has relied upon the averments made in
paragraph 5 of the writ petitions, which record the
withdrawal of the petitioners' appeals on account
of they being premature vide order dated
25.04.1990, and the reply of the respondent
society wherein the said position has been
admitted to be correct. He submits that it was
never the case of the respondent society that by
the order of the Registrar aforesaid, the expulsion
of the petitioners stood approved either
absolutely or conditionally upon the making of
payment by the petitioners as directed by the
said order.
(viii) Mr. Gupta submits that if the respondent society
desired to take action against the petitioners on
account of non-payment of the amounts
mentioned in the order of the Registrar, it was
obligatory on its part to resort to the mandatory
procedure prescribed under Rule 36 of the Rules.
Admittedly, the same had not been done.
(ix) Mr. Gupta further submits that the order dated
16.05.1990 passed by the Registrar granting
approval to the expulsion of the petitioners is void
ab initio since the same was not preceded, either
by the compliance of the procedure prescribed
under Rule 36 by the respondent society, or even
by a notice or hearing being given to the
petitioners before the passing of the said order.
The Registrar of Co-operative Societies, he
submits, had plainly accepted the statement
made by the respondent society that the
petitioners had not cleared up their outstanding
dues within fifteen days, without even putting the
petitioners to notice or ascertaining whether the
respondent society had fulfilled its own obligations
under the order dated 09.10.1989 passed by the
Registrar.
(x) In so far as the challenge to the order passed by
the Lt. Governor is concerned, Mr. Gupta submits
that the said order is ex facie illegal and suffers
from non application of mind. The Lt. Governor
had passed a cryptic order without addressing any
of the submissions made by the petitioners and
had failed to appreciate that the procedure under
Rule 36 of the Rules had been given a complete
go-by by the respondent society and the
Registrar.
(xi) Learned counsel for the petitioner further submits
that the conduct of the respondent society in
seeking to expel the petitioners was wholly mala
fide and without any cause. He submits that there
were other members whose monetary
contribution at the relevant time was either far
less than the contributions made by the
petitioners or were comparable to the contribution
of the petitioners, yet no action was taken against
them. Few instances in that regard have been
pointed out by the petitioners from the list of
members as on 31.03.1989, which forms part of
the audited accounts of the respondent society.
(xii) So far as the enrolment of the four new members
is concerned, the action of the respondent society
in enrolling respondents 5 to 8 was completely
mala fide. These respondents were enrolled as
members on a mere deposit of Rs.11,000/-. For
this purpose, learned counsel for the petitioners
has relied upon the list of members as on
31.03.1992 published by the society as a part of
the audited accounts of the society. The said list
discloses that respondents 5 to 8 had each paid
only Rs.11,000/- at the time of their enrolment on
31.10.1990, and even till as late as 31.03.1992
they had not paid further amounts. He submits
that if there was such urgency of receiving
payments, on account of the alleged defaults of
the petitioners, the respondent society should
have realized the entire cost of the flats from the
four newly enrolled members. However, the
conduct of the respondent society shows that
there was no urgency, occasion or justification to
insist on raising the demands as raised by the
respondent society and to take the step of
illegally expelling the petitioners from the
membership of the society. He also submits that
the four newly enrolled members were closely
related to the members/office bearers of the
society at the relevant time. Respondent no.5,
Smt. Varsha Rani was related to Shri Hemraj
Bansal, the then General Secretary of the society.
Shri Devender Kumar, respondent no.6 is the son
of the ex-President of the society; Smt. Nirmal
Garg, respondent no.7 is the daughter of Shri
Jagdish Bansal, the treasurer of the respondent
society and Shri Sushil Kumar Parikh, respondent
no.8 is the nephew of Shri Shiv Dutt Purohit, a
member of the managing committee of the
society. He submits that the enrolment of these
four members had been done even though the
appeals preferred by the petitioners from the
order of expulsion were pending before the Lt.
Governor. The petitioners had also moved
applications for stay on enrolment of new
members in their place. The appeals had been
preferred at the earliest on or about 29.5.1990.
Mr. Gupta, therefore, submits that the enrolment
of the said new members could not be said to be
bona fide, without notice or for valuable
consideration. He submits that all the newly
enrolled members were very well aware of the
pendency of the appeals preferred by the
petitioners and that their enrollments would be
governed by the doctrine of lis pendens. He
submits that, in any event, this Court had
restrained the enrolment of new members in
place of the petitioners on 26.11.1991 and had
further directed that the draw of lots, if held, shall
be subject to the final outcome of the said
applications moved by each of the petitioners.
The said stay applications are still pending and
the orders are still operating. He, therefore,
argues that the petitioners are entitled to
allotment of the four flats illegally allotted to
respondents 5 to 8 in W.P.(C) No.3626/1991.
(xiii) Mr. Gupta further submits that each of the
petitioners are ready and willing to pay to the
respondent society whatever amounts are legally
found to be due from them, along with interest at
the rate of 18 % per annum for the period the said
amounts have remained due and payable.
20. In support of his submissions, learned counsel for the
petitioners has placed reliance upon the decision of the Division
Bench of this Court in R.K. Aggarwal V. Registrar Co-operative
Societies, Delhi & Ors., 45(1991) DLT 105(DB) to submit that the
procedure prescribed under Rule 36 of the Rules for expulsion of a
member of a co-operative society is mandatory and not directory
and that non-compliance of the mandatory provisions would
invalidate the expulsion order.
21. Mr. Sudhir Nandrajog, learned senior counsel who
appeared on behalf of the respondent society submits that the
petitioners were wilful defaulters and despite three notices, they
had failed to pay the amounts due from them. It was only
thereafter that the respondent society had been driven to initiate
expulsion proceedings in respect of the petitioners vide notice
dated 14.01.1989. He submits that the period of one month
provided under Rule 36(2) for the purpose of holding a meeting
after the issuance of the requisite notice to the defaulting member
is the period prescribed for the benefit of the defaulting member
and it is always open to the member for whose benefit the said
period is prescribed, to waive off the same. He submits that the
petitioners had also waived the notice period of 30 days and this is
evident from their conduct in agreeing to make payment of the
amount due from them within a period of fifteen days of the passing
of the order of the Registrar dated 09.10.1989. He further submits
that after the approval of the expulsion of the petitioners by the
Registrar of Co-operative Societies, on 16.05.1990, the respondent
society had enrolled four new members in terms of the Managing
Committee resolution passed on 31.10.1990 on the same date. He
submits that there was no stay obtained by the petitioners from the
Lt. Governor of the order approving expulsion, and there was no
impediment in the respondent society enrolling the new members.
He submits that, in any event, the appeals preferred by the
petitioners have been dismissed and there is no illegality in the
enrolment of respondents 5 to 8 as members in place of the four
petitioners aforesaid. In support of his submission that the
petitioners had waived their right to receive 30 days clear notice,
Mr. Nandrajog relies upon the Supreme Court decision in Krishna
Bahadur V. Purna Theatere and Others (2004) 8 SCC 229 and
Jay Rubber Co. (India) Pvt. Ltd. V. State Chemicals &
Pharmaceutical Corporation of India Ltd. 21 (1982) DLT 11
(SN).
22. Mr. Nandrajog submits that the conduct of the petitioners
demonstrates their continued willful defaults in making payment.
They failed to make payment despite three notices and despite the
issuance of the statutory notice dated 14.01.1989. Even after the
passing of the order dated 05.10.1990 by the Registrar granting
then fifteen days time to make payment, these petitioners failed to
make the payment of even their admitted dues. Mr. Nandrajog
submits that this Court in the decision reported as Satish Chand
Gupta V. Presiding Officer, Delhi Co-operative Tribunal,
2009(159) DLT 497 relied upon another Division bench decision of
this Court in Satish Chandra and Another Vs. Registrar of Co-
operative Societies, 1993(26) DRJ (DB) wherein this Court had
held that the defaulting members should not be permitted to hold
the society to ransom and should deposit the call money with the
society under protest to show their bona fides, even if they dispute
the demands raised by the society. Mr.Nandrajog further submits
that at the time when the respondents 5 to 8 were enrolled as
members on 31.10.1990, the respondent society was not required
to invite applications from all eligible persons of the public or to
enroll members only after holding a draw of lots. Mr. Nandrajog
also relies on Section 34 of the Act to submit that even if there was
any shortcoming in the procedure adopted for the expulsion of the
petitioners, the same stands validated under the said provision.
23. Mr. J.N. Gupta, Advocate who appears on behalf of
respondent Nos.3, 5, 6, 7 & 8 has urged that respondents 5 to 8 are
bona fide purchasers without notice and for valuable consideration
in respect of the flats allotted to them. He submits that they were
enrolled on 31.10.1990 i.e after the approval of the expulsion of the
petitioners by the Registrar on 16.05.1990. He also submits that
there was no bar to the enrolment of any new member. He explains
that the respondent society had received Rs.11,000/- from each of
the respondents 5 to 8 at the time of their enrolment and the
balance amount was not demanded in view of the pendency of the
appeals preferred by the petitioners before the Lt. Governor. He
also adopts the arguments advanced by Mr. Sudhir Nandrajog, who
is appearing on behalf of the respondent society and respondents 1
to 4.
24. Having heard the arguments of learned counsel for the
parties, we are of the view that the expulsion of the petitioners from
the respondent society by the Registrar of Co-operative Societies;
the dismissal of their appeals by the Lt. Governor, and; the
enrolment of respondents 5 to 8 in W.P.(C) No.3626/1991 in place of
the petitioners are patently illegal and cannot be sustained. We are
also of the view that the actions of the respondent society and
respondents 5 to 8 in W.P.(C) No.3626/1991 cannot be said to be
bona fide and, therefore, we are of the view that no equity is
created in favour of the said respondents merely on account of the
fact that the said respondents 5 to 8 have since paid the amounts
demanded by the respondent society and they have been allotted
flats by the respondent society, and ever since they are in
occupation of the flats.
25. No doubt the petitioners evidently were in default of
making payments to the respondent society of the amounts due
from them. However, that by itself could not have necessarily led to
their expulsion from their membership of the respondent society. It
is well settled that it is not imperative for a co-operative society to
expel a member in case he is in default of making the requisite
payment. It is open to a co-operative society to decide to give
further time to the member to clear his outstanding dues, or to
downgrade his entitlement or seniority for allotment of a flat. In this
regard we may refer to the judgment of the Supreme Court in
Myurdhwaj Cooperative Group Housing Society Ltd. v. The
Presiding Officer, Delhi Cooperative Tribunal & Ors. (1998) 6
SCC 39.
26. Consequently, it cannot be said that the non payment of
the dues by each of the petitioners would have necessarily had the
consequence of their being expelled from the membership of the
respondent society. From the above narration of facts, it is clear to
us that the petitioners were, in fact, not validly expelled from the
membership of respondent society at any stage. Firstly, the
requisite notice in compliance of Rule 36(2) of the Rules,
admittedly, had not been given to the petitioners. The said notice
should have been given for a minimum period of one month before
holding the general body meeting.
27. Secondly, the so-called resolution passed by the general
body in its meeting purportedly held on 29.01.1989 has not seen
the light of the day. Despite the aforesaid specific averments made
by the petitioner to the effect that no such resolution to expel the
petitioner had been passed, the respondent society has not placed
before us the said resolution. The fact that the procedure
prescribed in Rule 36 of the Rules is mandatory also cannot be
disputed in view of the Division Bench judgment of this court in R.K.
Aggarwal (supra).
28. Thirdly, the expulsion proceeding evidently stood dropped
with the passing of the order dated 09.10.1989 as it did not contain
even a whisper with regard to the approval or even conditional
approval of the petitioners expulsion by the registrar. The said
order merely records a time schedule to be followed by the
petitioners as well as by the respondent society for taking steps to
discharge their respective obligations. Pertinently, whereas the
petitioners were granted 15 days time to make the payments as
aforesaid, the respondent society was required to take immediate
steps for release of the loan in the account of the petitioners from
the DCHFS. Admittedly, the respondent society had not taken the
said steps. In fact, it is seen from the record that the respondent
society had already received both the first and second installments
in respect of the loans sanctioned in favour of the petitioners and
the registrar was indeed misled at the time of passing of the order
dated 09.10.1989 into ordering the petitioners to pay interest on
the delayed release of the first and second installments of loans by
DCHFS. The least that the respondent society could have done was
to rectify its mistake by informing the petitioners and the registrar
of cooperative societies that the two loan installments in respect of
the petitioners had already been released on 18.10.1988 and
17.05.1989. It appears that it is precisely for this reason that the
respondent society did not request DCHFS to release the loan
installment in respect of the petitioners and also did not
communicate to the petitioners the amount of interest to be paid by
the petitioners on the delayed release of the installments within one
week as required by the order dated 09.10.1989 passed by the
registrar.
29. Fourthly, the common order dated 16.05.1990 granting
approval to the expulsion of the petitioners passed by the Registrar
of Cooperative Societies is patently illegal. The same is, in fact,
void ab initio as it was not preceeded by even a notice, much less a
hearing to the petitioners. It is well settled that no order which
causes prejudice to any party or materially affects his/her rights
adversely can be passed by any authority without complying with
the requisite rules and principles of natural justice. The order dated
16.05.1990 passed by the registrar granting approval to the
expulsion of the petitioners therefore cannot be sustained and is
liable to be quashed.
30. The arguments of Mr. Nandrajog, learned senior counsel
appearing for the respondent, that the notice period of 30 days
under Rule 36 had been waived by the petitioners is wholly without
merit. A perusal of the order passed by the Registrar on 09.10.1989
shows that the Registrar did not even proceed to examine the
validity or justification of the expulsion proceedings undertaken by
the respondent society. The said order does not record the so-
called waiver of their rights under Rule 36 by the petitioners. Even
by conduct it cannot be said that the petitioners have waived their
rights under Rule 36, as the issue of validity or justification for the
said action has not been gone into, by the Registrar at all. It also
cannot be said that the Registrar had rejected any of the
contentions of the petitioners with regard to the validity or
justification of the expulsion proceedings. We cannot conclude that
had the occasion arisen, the petitioner would not have raised the
issues with regard to the validity or justification of the expulsion
proceedings before the registrar. A perusal of the grounds of
appeal taken by the petitioners in their appeals preferred under
Section 76(1)(e) of the Act before the Lt. Governor shows that the
very first ground was to the effect that the requisite notice of
minimum 30 days had not been given as required under Rule 36(2)
of the Rules.
31. Reliance placed by Mr. Nandrajog on the decisions
aforesaid appears to be wholly misplaced. In Krishna Bahadur
(supra), the Supreme Court while holding that a right can be
waived by a party for whose benefit certain requirements or
conditions have been provided for by the statute, clearly held that
"whenever waiver is pleaded, it is for the party pleading the same
to show that an agreement waiving the right in consideration to
some compromise came into being". The respondents have,
however, failed to even plead "waiver" by the petitioners of their
right to receive a 30 day notice. Pertinently, in their statutory
appeal before the Lt. Governor, the first ground of appeal taken by
the petitioner was the failure of the respondent society to give a 30
day notice to them. From the orders passed by the registrar on
09.10.1989 and 16.05.1990 as also from the order passed by the Lt.
Governor, it cannot be said that the plea of waiver was ever
pleaded or advanced by the respondent society. Pertinently, even
in the counter affidavit filed before us, no plea of waiver has been
taken by the respondent society. The argument now advanced by
Mr. Nandrajog, learned senior counsel appearing for the respondent
society appears to be a result of the counsel's ingenuity, but it has
no factual basis for us to accept it.
32. We may refer to Ground No.3 taken by the petitioners in
their writ petition, wherein they have expressly urged that Rule
36(2) had not been complied with by the respondent society
inasmuch as the requisite notice had not been given to the
petitioners. In response to the said ground, all that the respondent
society has stated is that it had initiated action for default in
September 1988 by issuing a notice of demand followed by a
reminder and that a decision to expel was taken on 29.01.1989 with
another 15 days time was given to clear the dues. It is urged that
the registrar had given further time to the petitioners to clear the
dues. It is, therefore, pleaded that Rule 36(2) had been complied
with in letter and spirit. It is not pleaded that the petitioners had
waived the said objection.
33. The notice of demand or even reminders cannot be treated
as notice for expulsion which is required to be issued to the member
under Rule 36 of the Rules. A notice for expulsion should
specifically put the member to notice that the respondent society
proposes to expel the defaulting member. It is that notice which
should give a minimum 30 days to the defaulting member before
the general body meeting to consider expulsion of the member is
held. The earlier notices issued to the petitioners raising demands
or as reminders for making payment of the demands earlier raised,
cannot be treated as notice of expulsion for the purposes of Rule
36. For the same reason, we find that the reliance placed in
decision in Jai Rubber Co. (I) Pvt. Ltd. (supra) is misplaced.
34. In our view, if the respondent society was aggrieved by the
non compliance of the order dated 09.10.1989 by the petitioners, it
was open to the society to initiate fresh expulsion proceedings
against the petitioners under Rule 36 by issuing a fresh notice to
each one of them.
35. So far as the expulsion proceedings initiated vide notice
dated 14.01.1989 were concerned, the same stood dropped upon
the passing of the order dated 09.10.1989 by the registrar as no
approval to the proposed expulsion was granted by the registrar by
the said order. The order dated 09.10.1989 of the Joint Registrar
(Group Housing) was not a conditional order. It also did not provide
for any consequence for its disobedience. The order records that the
parties "mutually agreed" to the terms of the directions which were
passed. The society did not make any reservation in the
proceedings before the Joint Registrar to the effect that in case of
non-payment of the amounts by the petitioner, their expulsion from
the society membership would stand restored. In fact, the society
accepted the order dated 09.10.1989 and thereby waived their
objections to the petitioners' default and entitlement to expel them
from membership of the society.
36. In this background, the registrar could not have suddenly
issued the order dated 16.05.1990, as done by him, granting his
approval to the expulsion of the petitioners without requiring
compliance of Rule 36 by the respondent society and without even
granting to the petitioners prior notice and hearing in the matter.
The order dated 16.05.1990 granting approval to the expulsion of
the petitioners could not have been founded upon the earlier order
dated 09.10.1989 as the former order was completely silent on the
aspect of expulsion and did not state that failure of the petitioners
to make payment within 15 days of the passing of the said order
would result in the consequence of grant of approval to the
expulsion of the petitioners. This is clearly evident, firstly, on a bare
perusal of the order dated 09.10.1989 passed by the registrar, as
also by the fact that the petitioners' appeals against the said order
were dismissed by the Lt. Governor as being pre-mature.
Pertinently, the respondent society did not challenge the order of
the Lt. Governor dated 25.04.1990 to say that in his order dated
09.10.1989 the registrar had granted conditional approval to the
expulsion of the petitioners.
37. The conduct of the respondent society in seeking to expel
the petitioners and rushing to enroll new members even when the
petitioners' statutory appeals along with application for interim
protection were pending before the Lt. Governor does not appear to
be bonafide. Firstly, the respondent society demanded and
recovered a paltry amount of Rs.11,000/- from the four newly
enrolled members on or about 31.10.1990. By that date, the other
members of the respondent society, including the petitioners had
deposited much larger amounts with the respondent society. If the
respondent society was in such urgent need of funds to keep its
building project going and if the respondent society were acting
bonafide, the respondent society would certainly have demanded
and realized from the newly enrolled members the amount which
had been realized from other members who are not in default.
There was no reason for granting such favourable treatment to the
newly enrolled members, and the only reason appears to be the
close relationship that the four newly enrolled members had with
the then office bearers of the respondent society. Pertinently, for at
least 2½ years thereafter, these newly elected members did not
pay a penny other than Rs.11,000/- each deposited by them in first
instance.
38. As pointed out by Mr. O.P. Gupta, learned counsel for the
petitioners, a perusal of the list of members as on 31.03.1989,
which forms part of the audited accounts of the respondent society
shows that as on 31.03.1989, the construction money deposited by
various other members was far less than the amounts admittedly
deposited by the petitioners. For instance, Sh. Pawan Kumar having
membership No.8 had deposited only Rs.12,728/-. Mr. Harkesh
Gupta having membership No.111 and Smt. Usha Jindal having
membership No.112 had deposited only Rs.16,000/- and Rs.15,000/-
respectively, towards construction money. Pertinently, these
members had not even availed of the loan facility and so no amount
in their account had come from DCHFS Ltd. Similarly, Smt. Chander
Prabhu Dhavan having membership No.199 had merely deposited
Rs.100/- towards share money and Rs.11,000/- towards land money.
No amount was deposited by her towards construction money.
These facts show that there was no justification whatsoever for the
respondent society to take the drastic step of expulsion of the
petitioners. The petitioners appear to have been treated less
favourably when compared to the other members of the society.
39. It was submitted by Mr. J.N. Gupta, advocate, who
appeared for some of these private respondents, that the reason
why the society did not demand any amounts beyond Rs.11,000/-
from them was the pendency of the appeals of the four petitioners.
This statement of Mr. J.N. Gupta clearly shows that the said
respondents were aware of the pendency of the appeals preferred
by the petitioners as also the possibility of the petitioners
succeeding, in which case, the said respondents would lose their
right, if any, to get enrolled as members of the respondent society.
This also clearly shows that the respondents were also aware of the
applicability of the doctrine of lis pendens to their case.
40. The submission of Mr. Nandrajog that the action of the
respondent society in expelling the petitioners was saved by Section
34 of the Act needs only to be stated to be rejected. Section 34 of
the Act reads as follows:-
"34. Acts of co-operative societies not
to be invalidated by certain defects.-
No act of a co-operative society or of any
Committee or of any officer shall be deemed
to be invalid by reason only of the existence
of any defect in procedure or in the
constitution of the society or of the
Committee or in the appointment or election
or on the grounds that such officer was
disqualified for his appointment."
41. Section 34 is not intended to validate acts of a cooperative
society which are in breach of even mandatory provisions of the Act
and the Rules, and the principles of natural justice. The said section
protects from invalidity the acts of a cooperative society; its
committee, or; officer when there is any defect of procedure in the
constitution of the society; the committee, or; the appointment of or
election of an officer. Therefore, the action taken by an officer of a
cooperative society; any of its committee, or; by the cooperative
society itself cannot be called in question on account of a defect in
the procedure relating to the appointment or constitution of the
officer/committee or the society. The interpretation sought to be
advanced by Mr. Nandrajog, if accepted, would lead to absurd
consequences and would make a cooperative society, its committee
and officer bearers a law unto themselves as they would, then enjoy
complete protection of their conduct even if the same is violative of
the mandatory procedures prescribed under the Act and in breach
of the principles of natural justice. We, therefore, reject the
aforesaid submission of Mr. Nandrajog. Moreover, what is in
challenge is also the order passed by the Registrar, granting
approval to the petitioners' expulsion vide order dated 16.05.1990,
and the appellate order passed by the Lt. Governor. It is not even
the respondent's case that the orders passed by these statutory
authorities are protected by Section 34 of the Act.
42. Lastly, coming to the order passed by the Lt. Governor, we
find that he has not addressed any of the submissions advanced by
the petitioners. He has merely proceeded on the basis that the
petitioners were persistent defaulters and that they had failed to
make the deposit despite the order passed by the registrar granting
them 15 days time. The issue with regard to non compliance of
Rule 36, and the legality and justification for invocation of Rule 36
by the respondent society have not at all been addressed by the Lt.
Governor. The impugned order passed by the Lt. Governor,
therefore, in our view, cannot be sustained.
43. We, accordingly, quash the order dated 16.05.1990 passed
by the Registrar of Cooperative Societies thereby granting approval
to the expulsion of the petitioners from the respondent society. We
also quash the impugned order dated 28.08.1991 passed by the Lt.
Governor dismissing the petitioners appeals. We hold that the
expulsion of the petitioners from the membership of the respondent
society was illegal and we restore the membership of the
petitioners. We also hold that the enrolment of respondent Nos.5 to
8 in W.P.(C) No.3626/1991 against the memberships of the
petitioners to be illegal as there was no legally existing vacancy in
the respondent society at the relevant time and they had been
enrolled as members in place for the four petitioners.
Consequently, we direct the respondents to take immediate steps to
get the flats occupied by respondents nos. 5 to 8 in Writ Petition (C)
No.3626/1991, namely, Smt. Varsha Rani, Sh. Devender Kumar,
Smt. Nirmal Garg and Sh. Sushil Kumar Parikh, bearing membership
nos.208, 209, 210 & 211, respectively, vacated.
44. We further direct the respondents to forthwith hold the
draw of lots in respect of the four flats occupied by respondent
nos.5 to 8 in W.P. (C) No.3626/1991 for allotment of the flats to the
petitioners within six weeks.
45. The petitioners are also directed to pay to the respondent
society the following amounts within four weeks from today:
Name W.P. (C) Balance
No. outstanding
as on 31.7.88
Sh. H.D. Gupta 3639/1991 Rs.16,000
Sh. Sita Ram Bansal 3625/1991 Rs.31,000
Smt. Darshana Devi 3638/1991 Rs.36,000
Smt. Urmil Mittal 3626/1991 Rs.23,000
46. The petitioners shall also pay interest on the aforesaid
amounts at the rate of 18% per annum simple interest from
01.11.1989 onwards till the date of payment. The respondent
society shall also be entitled to raise demands from each of the
petitioners of any further amounts towards construction of the flats,
if similar amounts were demanded from all other members of
respondent society. Such demands shall be raised upon the
petitioners within a period of two weeks with complete details,
particulars and justification. The petitioners shall be liable to make
payments of the amount within two weeks thereafter. In case of a
challenge to the amount demanded, the petitioners may deposit
such amount without prejudice to the rights and contentions and
subject to the outcome of any legal proceedings which they may
initiate in this regard. However, we make it clear that the petitioners
shall not be liable to pay any amount towards maintenance charges
as they have not been allowed to enjoy the use of the flats by the
respondent society for all these years.
Each of the petitioners shall also be entitled to costs
quantified at the rate of Rs.20,000/- payable by the respondent
society. The writ petitions are allowed in the above terms.
(VIPIN SANGHI)
JUDGE
(GITA MITTAL)
JUDGE
APRIL 06, 2010
rsk/sr
