Sh. Sanjay Chiripal vs Registrar Co-Operative ...
2011 Latest Caselaw 2493 Del

*                      THE HIGH COURT OF DELHI AT NEW DELHI

%                                                   Judgment delivered on: 10.05.2011

+                                       WP(C) 3127/2011


SH. SANJAY CHIRIPAL                                             ...... PETITIONER

                                                   Vs


REGISTRAR CO-OPERATIVE SOCIETIES & ORS.                         ..... RESPONDENTS

Advocates who appeared in this case:

For the Petitioner:    Mr Neeraj Jain, Advocate.
For the Respondents:   None

CORAM :-
HON'BLE MR JUSTICE SANJAY KISHAN KAUL
HON'BLE MR JUSTICE RAJIV SHAKDHER

1.      Whether the Reporters of local papers may
        be allowed to see the judgment ?                        No
2.      To be referred to Reporters or not ?                    No
3.      Whether the judgment should be reported                 No
        in the Digest ?

RAJIV SHAKDHER, J

1. The captioned writ petition is directed against the order dated 28.01.2011 passed

by the Financial Commissioner in exercise of his revisionary powers under Section 116

of the Delhi Co-operative Societies Act, 2003 (hereinafter referred to as 'DCS Act'). By

the impugned order the Financial Commissioner has repelled the challenge laid to the

report of the Inquiry Officer (in short 'I.O.') dated 15.01.2008 submitted by one D.P.

Dwivedi, while conducting proceedings under Section 62 of the DCS Act.

2. It is important to note that the upshot of the impugned order of the Financial

Commissioner is that, the I.O. having put, the shortcomings and the deficiencies in the

working of respondent no.2 (hereinafter referred to as the Society) (as recorded in the

inspection report), to the society, he had the authority to seek explanation and record

compliance of such defects, shortcomings and deficiencies. The case of

misappropriation and mis-utilization of funds not being pressed by the complainants, the

Financial Commissioner was of the view that, under the scheme of the DCS Act,

remedial action, if any, which was required to be taken by the Managing Committee of

the society, could be directed to be taken by the Registrar in exercise of his powers under

Section 67 of the DCS Act. In other words, the Registrar continues to be empowered to

issue appropriate directions in pursuance of the IO's report. We would be touching upon

this aspect in the course of our judgment. However, despite the aforesaid, the petitioner

seeks to press the writ petition on the following grounds:

(i) that the I.O. acted way beyond his jurisdiction in accepting the explanation given

by the society;

(ii) as a necessary corollary to the first submission, it was submitted that the power of

censure lay with the Registrar; and

(iii) lastly, the impugned order was passed without appreciation of the material on

record.

3. Our discussion below will show each of these submissions is untenable.

However, before we proceed further it may be necessary to notice a few facts: First and

foremost the society in the case had acquired land on a freehold basis, and not at

concessional rates. Petitioner before us along with one Ashish Mehra had filed a

complaint with the Registrar on 17.01.2007. The complaint alluded to several

discrepancies and short-comings of the managing committee in running and managing

the affairs of society. Amongst many allegations and alleged violations, the main

violation evidently pertained to charging of entry fee and/or fee towards building

development fund from persons who became members of the society w.e.f. 14.01.1999.

It was alleged that amounts to the tune of nearly Rs 8,98,500/- was collected on this

account from 15 members. There were also allegations that persons who are not

members of the society were made office bearers and were also included at times as

special invitees, in the meetings, held by the managing committee of the society. There

were allegations concerning failure to hold elections as also with regard to the fact that

one, G.S. Saini had continued as the president of the society since 1996, while another

gentleman, one, Shri Rajiv Gupta had continued as the secretary of the society since

2002. The details with respect to the violations have been set out in annexure AA to the

writ petition.

3.1 Based on the aforesaid the Registrar vide order dated 23.02.2007 directed

inspection to be carried out in respect of the issues raised in the complaint, in exercise of

his powers under Section 61(1) of the DCS Act.

4. Consequently, Inspecting Officer submitted its report dated 04.04.2007. By virtue

of the said report, the Inspecting Officer arrived at the following conclusions:

"(i) Complaint of Shri Ashish Mehra is justified and he should be allowed refund of entry fees deposited by him (in any form) with the society exceeding Rs 10,000/-.

(ii) Society has been charging illegal entry fee directly or in the form of Building Development Fund.

(iii) Society is responsible for not executing the order dated 26/10/05 of Addl. RCS to refund back the entry fee.

(iv) Transfer of shares is not taking place unless entry fees is received by the society.

(v) Shri G.S. Saini, President himself has proposed the voluntary donation against all the norms.

(vi) Non-members of the society are being made office bearers in MC of the society and also in the screening sub-committee.

(vii) Non-members of the society are being made special invitees and were attending AGM's of the society.

(viii) In respect of holding elections as per the prescribed norms, the office bearer are being chosen unanimously and Shri Saini has been the President since 1996.

(ix) Members are chosen office bearers of the MC without their personal presence in the AGMs.

(x) Some of the MC members are not attending three consecutive mandatory meetings of the MC.

(xi) There is ample indication about holding of SGBMs of 5/11/06 and 5/12/06 fraught with several procedural inconsistencies.

(xii) The society favoured MC members occupying the common space of the society premiss unauthorizedly may also be true to a great extent in the absence of any specific rebuttal from the society.

(xiii) The allegation regarding misappropriation and misutilization of fund could not be substantiated as these were generalized in nature in the original complaint filed by Shri Sanjay Chiripal as summarized in the order for inspection dated 22/2/2007.

(xiv) A list filed by the society (and confronted with the complainant) is being enclosed herewith which shows collection of transfer fee in the form of Building Development Fund by the society from its new members w.e.f. 14.12.99."

5. On receiving the report, the Registrar vide order dated 26.09.2007, in exercise of

his powers under Section 62 of the DCS Act, appointed an I.O. The I.O. enquired into

the affairs of society in the background of the observations made in the inspection report.

Particular emphasis was laid on the fourteen (14) violations listed out in the concluding

portion of the inspection report. These have been extracted in paragraph 4 hereinabove.

5.1 Continuing with the narrative, after a detailed inquiry (in respect of the co-

complainant Ashish Mehra), the I.O. noted that both, in view of the directions issued by

the Registrar, from time to time and the judgments of the courts on this issue deprecating

this practice; that no entry fee could be charged from new members who had purchased

flats in the society. The I.O. thus observed that he found no merit in the argument made

by the society in not refunding the amount charged on this account. The I.O. was further

of view that since the amounts had been refunded in the case of another member, i.e., one

Mr Moda albeit on the directions of the District Forum under the Consumer Protection

Act, the society would be required to refund the excess amount also qua the said

complainant, i.e., Ashish Mehra. In so far as the petitioner was concerned after

discussing the matter at length the I.O. concluded as follows:

"Based on the above discussions, it is clear that society has been charging money in the name of development charges which does not have support of

any order. Instead it is charging money in violation of various Registrar Cooperative Societies and court orders. However, no findings on the payments made by Sh. Sanjay Chiripal can be made at this stage because the matter is sub-judice in State Commission." (emphasis is ours)

5.2 We had asked the learned counsel for the petitioner as to whether he had been

refunded the amount collected in the form of entry fee and/or building development

charges. The learned counsel for the petitioner, on instructions of his client present in

court informed us that he had collected the amount. In respect of other persons from

whom this amount had been collected, the society seems to have taken the position that

these were voluntary donations and in any event the complainants could not make a

grievance qua the others. The I.O., however, came to the conclusion that the complainant

had been able to establish that the society was not transferring shares without charging

money and that the said amount may have been collected in another form, under a

different name and perhaps not as entry fee.

5.3 This is an aspect, according to us, the Registrar would direct his attention to and

pass appropriate orders if, persons similarly placed claim refund of monies which the

society was not permitted to collect; though after complying with the due provisions of

the DCS Act.

5.4 To us what was of graver concern was the observation of the I.O. that the society

had pleaded before him that till 2005-06 the father of one of the complainant's was the

executive member and he supported the decision of the society to collect amounts from

new members in the form of voluntary donation towards building development fund. The

learned counsel for the petitioner informed us that the petitioner was not the complainant.

A close look at paragraph 4 of the writ petition seems to suggest perhaps the intention

was to file the present writ petition in the name of the other complainant and not Shri

Sanjay Chiripal. As to what prevailed with the complainants to make the switch is not

known. Though it does leave us with an impression that no one was complaining about

the functioning of the society while they were part of the Managing Committee. The

complaints were lodged only in 2007.

5.5 The society's rationale on the other hand was that since the building was old,

built in 1968, it required funds for its up-keep. The charges were paid voluntarily. Be

that as it may, as indicated above by us, the Registrar will take, as he should, proper

measures in this regard in facilitating refunds.

5.6 The other major violation allegedly committed as per the petitioner was that not

only were the non-members made office bearers of the society but were also asked to

participate as special invitees both at the meetings of the managing committee as well as

at Annual General Meeting (AGM). The I.O. noted the stand of the society that, the said

persons were included as office bearers or as invitees in place of those original members

who due to old age and infirmity were unable to participate in the affairs of the society.

The purpose being to provide effective representation to such members through their

progeny. It was the society's stand that this was permissible under Rule 22 of the Delhi

Cooperative Societies Rules, 2007 (in short, the DCS Rules). The I.O. also noticed the

society's stand that, as soon as the irregularity was brought to its notice, the said

members resigned and hence no cause of action survived. The I.O., in view of the

remedial action taken by the society, did not precipitate the matter any further.

5.7 On the aspect of the same person being elected as the president since 1996 the

I.O. made note of the following submissions made by the society:

"In reply to these paras society has stated that it is a matter of record that there is no contest in the election since 1996. Nobody can be compelled to contest the election and unanimous election shows that the Managing Committee enjoys mandate of all the members which is being taken by the complainant otherwise as he is habitual of negative thinking. Similarly it has contended that the finding is misconceived and contrary to law. The election of the MC for the post of Treasurer and Secretary is done by majority vote of the MC members present and voting and there is no bar for electing a person who is not present. Regarding some members of the MC not attending three consecutive meetings due to sufficient cause, society

stated that and they had informed the MC of the reasons for their non- attendance for some of the meetings."

5.8 After recording the stand of the society the I.O. concluded as follows:

"In any case this a merely a technical irregularity which is fully cured by the provisions contained in Section 39 of the DCS Act, 2003. Moreover, there is no such instance in case of the present Managing Committee and as such no cause of action subsists as on date." (emphasis is ours).

5.9 As regards the issue of procedural irregularity in holding Special General Body

Meeting (in short, SGBM) which pertained to a vintage date of 05.11.2006 and

05.12.2006; the I.O. after recording the stand of the complainant that the Managing

Committee had no powers to convene a SGBM on its own, observed that the society had

accepted these issues directly and/or indirectly. Since remedial action had been taken by

the society, the I.O. further observed that no malafides could be attributed to the society

on this account.

6. On the issue of unauthorized encroachment by members of the society qua

common spaces, the society's stand that it had taken action against all persons, who had

encroached upon common spaces was recorded. The society had also brought to the

notice of I.O. the factum of a civil suit being instituted by the writ petitioner on this very

issue, which was evidently pending adjudication at the relevant point in time. The

society denied that at that point in time members of the Managing Committee were

occupying common spaces. He also took notice of the fact that the society had alleged

that the writ petitioner himself was guilty of unauthorized encroachment of common

space. The I.O. thus observed that it was imperative on the part of the society to remove

unauthorized encroachment without discrimination, and that it should take up the matter

with the competent authority for removal of such encroachments within the precincts of

the society.

6.1 Qua the issue of misappropriation of funds the I.O. reached the following

conclusion:

"As regards misappropriation and mis-utilization of the funds by the society, the Inspecting Officer has not substantiated any of the allegation and even before the undersigned, Sh. Sandeep Kumar Advocate did not press any point on this issue. In view of the above, there is no need to inquire into this issue and it therefore seems that financial aspects of society is being managed properly and as per rules/ regulations."(emphasis is ours).

7. With the aforesaid background, in the operative portion, the I.O. made the

following observations:

"In nutshell inquiry reveals that most of the allegations leveled against the society has been admitted by it directly or indirectly and society has tried to justify its actions. The complainant, except for refund of money to Sh. Ashish Mehra has not been able to prove its points. There are two issues which are subjudice therefore no finding have been made on it. The various technicalities enumerated by complainant as illegality committed by society has since been rectified by the society or remedial measures has been taken and there is no cause of action on these points now. The society though has erred in not strictly following the DCS Act, Rules and its byelaws but it has been able to function within the financial norms as the allegations regarding misappropriation or mis-utilization of funds has not been pressed by the complainants as there does not exist any."

8. On the perusal of the report of the I.O. and the impugned order passed by the

Financial Commissioner it is quite clear that the Registrar would have to take remedial

action in respect of matters which are outstanding. According to us broadly these are:

(i) Matters pertaining to refund of monies, which were collected in the form of entry fee

or building development charges or under any other nomenclature. Refund will have to

be made even to those who had not instituted a complaint in that regard.

(ii) Clearance of encroachment in the common spaces within the precincts of the society.

Any measure taken in this respect by the Registrar would necessarily include all

encroachers, including the writ petitioner, if it is so found, by the Registrar. In this regard

since there is a mention of a pending civil suit, the Registrar will take measures for

obtaining appropriate orders from the court concerned, in the event, there are any interim

order in favour of the writ petitioner. We may note that no such interim has been brought

to our notice by the writ petitioner.

(iii) The Registrar shall take steps with regard to all other statutory compliances, to

which due adherence is required of the society.

9. Before concluding we must observe that the Financial Commissioner has

correctly appreciated the scheme of the Act which, in our view, would require the I.O. to

ascertain from the society in the course of his inquiry, if issues, in respect of which the

complaint(s) were made, remained outstanding on the date on which he conducted an

inquiry. His efforts in that regard would necessarily be a subject matter of the I.O's

report. Therefore, we repel the contention of the petitioner that the I.O. exceeded his

jurisdiction in bringing on record, the remedial measures taken by the society in respect

of the infractions brought to the notice of the Registrar by the complainants.

10. On hearing the learned counsel for the petitioner and perusing the papers, we are

quite convinced that the present writ petition is the product and, a consequence of petty

personality clashes between those who run and manage the society and those who are

either out of it or want to be part of it. The fact remains that the I.O. has not found any

financial irregularity in the conduct of the affairs of the society by the managing

committee. As a matter of fact the complainant has given up that allegation, as noticed

by the I.O. The only exception was with regard to the collection of monies; towards what

the society termed as building development charges/ entry fee. The society's rationale, as

noticed hereinabove by us, was that, since the society was old, funds were required for its

up-keep. Since such collection of funds has been found to be against the provisions of

law, quite rightly the society has been called upon to refund the monies to the

complainant. As noticed by us above, this direction will enure to the benefit of all

members who are similarly placed.

11. Taking into account the above we are of the view that no purpose would be served

in burdening this court with supervision of the affairs of the society, in respect of those

aspects which the Registrar is fully empowered to deal with, by allowing the present

proceedings to continue. Time, energy and precious funds of the society could be better

spent to manage the affairs of the society. The writ petition is accordingly disposed of

with aforesaid directions.

RAJIV SHAKDHER, J

SANJAY KISHAN KAUL,J

MAY 10, 2011 kk