Kumkum Nagar Co-Operative ... vs The District Registrar ...
2021 Latest Caselaw 10913 Guj

       C/SCA/7908/2021                                ORDER DATED: 06/08/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
               R/SPECIAL CIVIL APPLICATION NO. 7908 of 2021
                                   With
               R/SPECIAL CIVIL APPLICATION NO. 7909 of 2021
                                   With
               R/SPECIAL CIVIL APPLICATION NO. 7947 of 2021
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       KUMKUM NAGAR CO-OPERATIVE HOUSING SOCIETY LIMITED,
                             VIBHAG-1
                              Versus
     THE DISTRICT REGISTRAR CO-OPERATIVE SOCIETIES (HOUSING),
                           AHMEDABAD
==========================================================
Appearance:
MR ANSHIN DESAI, SENIOR ADVOCATE with MR DIPEN DESAI(2481) for
the Petitioner(s) No. 1
MS. DIVYANGNA JHALA, AGP (1) for the Respondent(s) No. 1
NOTICE SERVED(4) for the Respondent(s) No. 2
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 CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
                     Date : 06/08/2021
                      ORAL ORDER

Not only the facts involved and the issue raised are common and identical, all the petitions arise from order dated 18/19.5.2021 passed by the respondent No.1. Therefore all the three petitions were heard together and are treated for disposal by this common order.

2. Heard learned senior advocate Mr.Anshin Desai assisted by learned advocate Mr.Dipen Desai for the petitioners and learned Assistant Government Pleader Ms.Divyangna Jhala for the respondent State and its authorities, in all the petitions.

3. The present petitions are directed against order dated 18/19.5.2021 passed by the District Registrar, Co-operative Societies (Housing), Ahmedabad - respondent No.1, whereby the said authority, acting under the provisions of Sections 107 and 108 of the Gujarat Co-operative Societies Act, 1961 passed interim order placing the petitioner housing society in liquidation, further appointing the Liquidator. The order dealt

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with three parcels of land belonging to Society bearing survey No.359, Town Planning No.3, Final Plot No.183 Paiki at Ranip, Ahmedabad. The first parcel, admeasures 4540 sq. mtrs. It appears that on the said different portions of land, residential flats are constructed. The total area which belonged to the petitioner society is 1352 sq. mtrs.

3.1 Although the impugned order is common, since there are three parcels of land, three different petitions came to be put up by the petitioners. The order recorded that the petitioner society was given opportunity of making submissions in respect of the said order within one month, failing which final order of liquidation of the petitioner society would be passed. 3.2 Section 107 of the Co-operative Societies Act empowers the Registrar to pass an interim order directing to wind up a society on the grounds and considerations mentioned in the Section. The Section reads as under.

107. Winding up.-(1) Except as otherwise provided in sub- section (1A) If the Registrar-

(a) after an inquiry has been held under Section 86, or an inspection has been made under any of the provisions of sub-section (8) of section 84, Section 87 or section 88 or on the report of the auditor auditing the accounts of the society, or

(b) on receipt of an application made upon a resolution carried by three-fourths of the members of a society present at a special general meeting called for the purpose, or

(c) of his own motion, in the case of a society which-

(i) has not commenced working, or

(ii) has ceased working, or

C/SCA/7908/2021 ORDER DATED: 06/08/2021

(iii) possesses shares of members deposits not exceeding five hundred rupees, or

(iv) has ceased to comply with any conditions as to registration and management in this act or the rules or the bye-laws, or

(v) has failed to comply with any directions issued under sub-section (1) of Section 160 or such directions as modified under sub-section (2) of that section.

is of the opinion that a society ought to be wound up, he may make an interim order directing it to be wound up.

(1A) Notwithstanding anything contained in sub-section (1), in case where the members of the society, after having discharged liabilities towards the debt and assets of the society, upon a resolution carried by three-fourth majority of the members of the society present at a special general meeting called for the purpose, suo motu resolves to wind up the society and conveys such resolution to the Registrar. The Registrar shall, after disposing off the surplus assets in accordance with the provisions of section 115, cancel the registration of such society under section 20.

(2) Where an interim order is made on a ground specified in clause (a) or sub-clause (iv) of clause (c) of sub-section (1) a copy thereof shall be communicated, in the prescribed manner, to the society calling upon it to submit its explanation to the Registrar within a month from the date of the issue of such order.

(3) The Registrar, after giving an opportunity to the society of being heard, shall make a final order, vacating or confirming the interim order.

3.3 In the impugned order, it is recited that the petitioner society has committed breach of condition No.6 of order dated 31.7.1988 whereby the land was granted to it for the purpose of constructing residential houses. As per the order, the petitioner society came to be bifurcated into three different housing societies, which was done pursuant to the order of the Assistant District Registrar. The said bifurcation, it was stated, is in breach of condition of the aforesaid order dated 31.7.1988. It is

C/SCA/7908/2021 ORDER DATED: 06/08/2021

further stated that even after passage of several years, the petitioner society has failed to achieve the object for which it was permitted to come into existence, therefore, it is considered desirable to liquidate it under Section 107 of the Act.

3.4 As stated above, the impugned order is an interim order for sending the petitioner society into liquidation. Simultaneously it also provides to appoint a Liquidator.

4. Learned senior advocate submitted that at the stage of passing of interim order of liquidation, the Liquidator could not have been appointed. He next submitted that the order was passed without hearing the petitioner. It was submitted that observance of rules of audi alteram partem even at the stage of interim order was a requirement of law. Learned senior advocate relied on decision of this Court in Apexa Co-op. Bank Limited Vs. District Registrar [1993(2) GLH 861].

4.1 The submission of learned senior advocate that even at the stage of passing of interim order the society was required to be heard by the District Registrar, has got merit in view of decision in the Apexa Co-op. Bank Limited (supra).

4.2 Learned Assistant Government Pleader however submitted that the Liquidator would be required to take possession of the books and accounts at the interim stage to avoid any mischief of tampering at the end of the petitioner society. He submitted, therefore, that the order is justified and is properly passed including simultaneously appointing the Liquidator. He submitted that the rules of natural justice are not in straight- jacket and will have to be applied as the circumstances may demand. He sought to buttress this proposition by referring to the decision of the Apex Court in Dharampal Satyapal Limited Vs. Deputy Commissioner of Central Excise, Gauhati

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[(2015) 8 SCC 519].

4.3 As the petition was contested by filing affidavit in reply common in all the three petitions, learned Assistant Government Pleader further relied on contentions, submissions and statements made in the affidavit in reply with regard to the submissions of the petitioners that appointment of liquidator could not have been immediately done, decision of the Apex Court in Harijan Devabhai Jivabhai Vs. Becharbhai Valabhai Vaniya and Others, [(2001) 9 SCC 90] was sought to be relied on more particularly, paragraph Nos. 11 and 12 thereof.

4.4 In Apexa Co-op. Bank Limited (supra) the Court inter alia mentioned in the aforesaid paragraph that in appropriate cases the Court may appoint receiver to protect and reserve the property. It was further stated that receiver may permit the person who is holding the property to act as an agent of the receiver and the direction to deposit the royalty can also be issued. It was observed that such measures may be necessary to prevent further injury to the rights of the parties and to protect the property. It was further stated that if the allegation that the society was established by committing fraud is found to be true, then such persons should not be permitted to take undue advantage.

5. The scheme of winding up envisaged in the provision of Section 107 of the Co-operative Societies Act provides two stages in the process of winding up of a co-operative society. The first stage is of passing of interim order and in the second stage, final order is to be passed under Section 108 of the Act. As per Section 108, appointment of Liquidator is provided for. It says that when an interim or final order is made under Section 107

C/SCA/7908/2021 ORDER DATED: 06/08/2021

for winding up of a society, Registrar may, in accordance with rules, appoint a person to be the Liquidator of the society and fix his remuneration.

5.1 The Division Bench in Apexa Co-op. Bank Limited (supra) observed on the mechanism of winding up as under.

"The mechanism of winding up in S.107 contemplates taking of two distinct essential steps in a proper sequences. Therefore, the right of hearing provided at the second stage of the proceeding cannot be treated as having excluded, by necessary implication, the right of hearing at the first stage. In the next place, the legislature could not possibly have left the right of hearing to be implied at the second stage, having regard to the fact that it is the final step in the process of liquidation and such a step cannot ordinarily be taken unless a reasonable opportunity of hearing is afforded. An express provision in regard to a reasonable opportunity of hearing at that stage cannot, therefore, be pressed into service to exclude hearing at the first stage by implication."

(Para 75)

5.1.1 The Court proceeded to observe and held further,

"What the competent authority does at the stage of passing an interim order as not merely to ascertain whether a prima facie case exists for the purpose of passing an ex parte ad interim order, subject to modification after notice to the affected party. As a result of the making of such an order, serious consequences follow, especially when a liquidator is appointed soon thereafter. The office-bearers of the society are excluded from the management, the assets of the society vest in the liquidator and its business would automatically come to a standstill, since its image would be tarnished, having regard to the fact that the process of winding up has commenced. Under such circumstances, the right of prior notice and hearing cannot be jettisoned by implication, save in very exceptional circumstances where compulsive necessity so demands on grounds

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such as public injury is likely to flow from the least delay or dire social necessity."

(Para 75)

5.1.2 The Division Bench observed that order even at the interim stage will have serious consequences of action against the petitioner society even before the final winding up order is considered to be justified. It proceeded to state thus,

"... The argument, in substance, is that fair play in action does not demand a prior notice and hearing because adverse result is a foregone conclusion. The submission, in our opinion, demonstrates unfairness because it rests on a pre-judgment of the case even before the whole of the case is disclosed and a chance of meeting the same is afforded. One cannot overlook that even there are manifest grounds for action, for a proper assessment of the situation and for forming an objective opinion in a just and fair manner, a prior hearing even after the defects and irregularities are brought to the surface would be necessary." (Para 77)

5.2 The Division Bench, therefore, has clearly laid down that merely because right of hearing is provided in respect of second stage in the statutory provisions, it does not have an automatic exclusionary effect of discarding the principle of natural justice and right of audi alteram partem before passing the interim order, which is the first stage in the winding up. It is stated that the right of prior notice and hearing cannot be jettisoned by implication, except in very exceptional circumstances such as dire social necessity.

5.3 The decision in Apexa Co-op. Bank Limited (supra) and the statement of law laid down therein is in the context of the very provision under which the powers are exercised by the District Registrar while passing the impugned order. The extract provision about the flexibility of rules of natural justice, therefore cannot displace what is laid down in Apexa Co-op.

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Bank Limited (supra) by the Division Bench of this Court.

5.4 There was no escape that respondent authorities represented by the learned Assistant Government Pleader from the above position of law propounded by this Court in the decision of Apex Court in Apexa Co-op. Bank Limited (supra). It could also not be disputed that the impugned order came to be passed without issuance of prior notice and without giving opportunity of hearing to the petitioner- society.

5.5 In the affidavit in reply, the respondents stated that they are bound by law laid down by this Court in Apexa Co-op. Bank Limited (supra). In that context, he stated on oath that "It is stated that the deponent shall withdraw the impugned order only on the limited aspect of opportunity of hearing". Further it was stated thus: "It is stated that the petitioner society shall be served with a fresh notice under Section 107 of the Gujarat Co- operative Societies Act, 1961 and a fresh interim order shall be passed after providing an opportunity of hearing to the official and authorized person of the petitioner society."

5.6 Thus, the respondents authority stated and agreed that they would withdraw the impugned order and would extend opportunity of hearing to the petitioner society.

6. Although learned Senior Advocate for the petitioner stated that the petitioner stands satisfied with this part of the stand of the respondents, hastened to submit that what is mentioned in the subsequent lines of the reply affidavit quoted above inter alia that after issuance of fresh notice under Section 107 of the Act, fresh interim order shall be passed, amounts to rejudging the case. He submitted that this stand is suggestive that the respondents have made up their mind to pass the similar impugned order again.

          C/SCA/7908/2021                           ORDER DATED: 06/08/2021



6.1       The above submission has substance if the authority issues

show cause notice with pre-determined mind, it would not serve any purpose of hearing the petitioner afresh. Although learned Assistant Government Pleader immediately clarified that notwithstanding that the above statement as reflected in the affidavit-in-reply respondent No.1 would not act with pre- determined approach and fresh decision will be taken in accordance with law only, there is no escape that above statement and the stand is part of the affidavit-in-reply filed by the respondent, therefore in that regard it is observed and hereby provided that while conducting the proceedings after withdrawal of the impugned order and after issuing show cause notice as per the above law, the authority concerned shall consider all the contentions of the petitioners. Any pre- determined approach shall have to be eschewed. The authority shall consider the case of the petitioner independently and without being influenced by earlier order render a fresh decision and pass the order anew.

6.2 The entire merits and the issue shall be at large with the authorities concerned and all the contentions of the petitioner society are kept open and shall be treated open.

6.3 The necessary exercise of the issuance of show cause notice to the petitioner society and taking fresh decision after extending opportunity of hearing to the petitioner society shall be completed within a period of eight weeks from the date of service of the present order. The fresh decision shall be taken on its own merits and without being influenced by the impugned order.

7. All the petitions are disposed of accordingly.

(N.V.ANJARIA, J) Manshi