Gujarat High Court

Krishnadham Awas Yojna vs State Of Gujarat on 1 February, 2021

Bench: Biren Vaishnav

            C/SCA/14948/2020                                   CAVJUDGMENT



                 IN THEHIGHCOURTOF GUJARATAT AHMEDABAD

                  R/SPECIALCIVILAPPLICATIONNO. 14948of 2020


FORAPPROVALANDSIGNATURE:


HONOURABLEMR. JUSTICEBIRENVAISHNAV

==========================================================

1 Whether Reporters of Local Papers may be allowed NO to see the judgment ?

2 To be referred to the Reporter or not ? NO

3 Whether their Lordships wish to see the fair copy NO of the judgment ?

4 Whether this case involves a substantial question NO of law as to the interpretation of the Constitution of India or any order made thereunder ?

========================================================== KRISHNADHAMAWASYOJNA Versus STATEOF GUJARAT ========================================================== Appearance:

MRBAIJUJOSHI(1207)for the Petitioner(s)No. 1 MS.NIDHIVYAS,AGP(99) for the Respondent(s)No. 1 NOTICESERVED(4)for the Respondent(s)No. 1,2,3,4 ==========================================================

CORAM: HONOURABLE MR. JUSTICE BIREN VAISHNAV

Date: 01/02/2021

CAVJUDGMENT

1. In this petition under Article 226 of the

Constitution of India, the petitioner has prayed for

a direction to quash and set aside the order dated

C/SCA/14948/2020 CAVJUDGMENT

05.09.2020 passed by the respondent No.3-

District Registrar appointing the respondent no.4

as custodian of the petitioner society and also the

order dated 03.11.2020 passed by the respondent

no.2-Additional Registrar, Cooperative Societies,

by which, the order dated 05.09.2020 was

confirmed.

2. Facts in brief are as under:

2.1 It is the case of the petitioner that the petitioner

society is a society registered on 17.04.2008. A

custodian was appointed who held the elections

of the society on 31.03.2019 and after the

elections, the Committee started functioning

regularly. The case of the petitioner is that after

the Committee took charge, one member of the

Committee misappropriated some amount, there

were vacancy of three members of the Managing

Committee who during the lockdown had left the

society, however, since three other persons were

co-opted, the Committee of the society

C/SCA/14948/2020 CAVJUDGMENT

continued to function in accordance with Coram

of 50% in accordance with the bye-laws. The

case of the petitioner is that though the society

was continuing the function through its

Committee, by the order dated 05.09.2020, in

exercise of powers under Section 74D of the

Gujarat Cooperative Societies Act, the

respondent no.3-District Registrar appointed a

Custodian and the order of the District Registrar

was confirmed in Revision.

3. Mr.Baiju Joshi, learned advocate for the petitioner

would submit that the orders dated 05.09.2020

and 03.11.2020 are bad in law. He would submit

that the order was passed at the pretext of a

member of a legislative assembly Shri Kishorbhai

Chauhan. The order was therefore passed under

political pressure on an application made by the

MLA of the Vejalpur constituency. The order was

therefore mala-fide and therefore deserve to be

quashed and set aside.

C/SCA/14948/2020 CAVJUDGMENT

3.1 The next submission of Mr.Baiju Joshi was

that a committee was duly constituted on

31.03.2019. The Committee had started

functioning. None of the components of Section

74D of the Act viz. neither was the term of the

Committee over nor was there a case that

Committee once appointed had not started

functioning. In the submission of Shri Joshi

therefore in absence of both the components, the

exercise of power by the District Registrar under

Section 74D of the Act was without jurisdiction.

3.2 The next submission of Mr.Baiju Joshi was

that the order suffered from violation of principles

of natural justice. He would submit that it was

apparent from reading the order dated

05.09.2020 passed by the District Registrar that

the same was passed without giving an

opportunity of hearing to the petitioner or even a

show cause notice. The order therefore was bad

in law and deserve to be quashed and set aside.

C/SCA/14948/2020 CAVJUDGMENT

3.3 The next submission of Mr.Baiju Joshi was

that the society in accordance with the provisions

of Section 74D, 74(1C)(i) read with the proviso

thereto was entitled to co-opt three members.

Such members were therefore co-opted and of the

11 members of the Committee, 9 members were

functioning as members of the Committee and in

accordance with the bye-law therefore, at no

point of time there were less than six members in

the Managing Committee and therefore the

exercise of powers under Section 74D was

unwarranted.

3.4 Mr. Joshi would submit that the resignations

of which the District Registrar has taken note of

could not have been said to be valid resignations

in the eye of law. He would draw the attention of

the Court to the bye-laws annexed to the

rejoinder and submit that as per bye-law no.36(6)

read with bye-law 39(1), the resignation had to be

tendered to the society. No such resignation was

C/SCA/14948/2020 CAVJUDGMENT

ever submitted before the society and therefore

such a resignation cannot be the basis of

appointment of a custodian.

3.5 In support of his submissions, Mr.Baiju Joshi

relied on the following decisions:

I. State of Madhyapradesh and Ors. V.

Sanjay Nagayach and Ors. [(2013) 7

SCC 25]. He would rely on headnote E

and H of the decision to submit that when

the statutory authority, as in the present

case, exercises powers on the basis of the

political masters, the same needs to be

quashed and set aside.


  II.        Vashkui         Dudh           Utpadak          Sahakari

             Mandli        Ltd.      And     Anr.       v.      District

             Registrar,           Cooperative              Societies,

             Surat.       He relied on paras 5.2 and 6.1 of

the said decision to support his submission

that powers under Section 74D were not

warranted in the facts of the case.

   C/SCA/14948/2020                               CAVJUDGMENT




III.    Jayantibhai Dahyabhai Patel and Ors.

V. State of Gujarat reported in [2007

(3) GLR 1978] to support his submission

that an opportunity of hearing ought to be

given in case a custodian is to be

appointed. He would submit that this was

in accordance with the law laid down with

the Division Bench of this Court in the case

of Amreli District Cooperative Sale

and Purchase Union Ltd. V. State of

Gujarat and others reported in 1982 (2)

GLR 1244.

IV. Valvada Milk Producers' Cooperative

Society Ltd. Passed in Special Civil

Application No.5758 of 2020 wherein,

he would submit that the Court had

considered the decision in case of Sanjay

Nagayach (supra) and opined that no

circumstances existed for supersession of

the Committee under Section 81 of the

Gujarat Cooperative Societies Act.

       C/SCA/14948/2020                                  CAVJUDGMENT




     V.     Shri          Pati      Dudh          Utpadak           Sahkari

Mandali Ltd. v. District Registrar of

Co-Operative Societies and Ors. passed

in Special Civil Application No.18379 of

2019 dated 17.10.2019.

4. Ms.Nidhi Vyas learned AGP appearing for the

State would draw the attention of the Hon'ble

Court to the affidavit in reply filed to the petition.

She would submit that the order of the District

Registrar dated 05.09.2020 and the order of the

Additional Registrar (Appeals) dated 03.11.2020

were just and proper.

4.1 She would further submit that on perusal of

the orders under challenge, it would indicate that

the parameters of Section 74D were aptly present

in the facts of the case. The District Registrar

found that after the elections which were held on

31.03.2019, wherein a Committee consisting of 11

members was elected, two members of the

Committee resigned on 11.06.2020 and four

C/SCA/14948/2020 CAVJUDGMENT

members resigned on 26.06.2020. Of the

Committee of 11 members therefore 6 members

had resigned and therefore from the beginning of

the term, the Committee was not functioning

because it only had five members. It was in these

circumstances that the Registrar was of the view

that in accordance with Section 74D of the Act, a

situation had arisen where in respect of the

society, though a Committee had been elected, it

was not functioning within a period of three

months. Such a situation having arisen, no fault

can be found with the order of the District

Registrar exercising powers under Section 74D of

the Act.

4.2 Ms.Nidhi Vyas would submit that on reading

Section 74D of the Act what is evident is that no

opportunity of hearing for show cause notice is

necessary before exercising powers under Section

74D of the Act. She would rely on the decision in

the case of Banaskantha District Cooperative

Milk Producers' Union Ltd. V. State of

C/SCA/14948/2020 CAVJUDGMENT

Gujarat reported in 2015 AIJEL-HC 233371 .

She would rely on para 20 of the decision to

submit that there is no application filed to afford

an opportunity of hearing.

4.3 Ms. Vyas would distinguish the decision cited

by Mr.Joshi in the case where Section 81 was

invoked. She would submit that the principles of

natural justice have to be considered in context of

the Sections when it was specifically provided

under Section 81 when a society has to be

superseded, that an opportunity of hearing ought

to be given, in contradistinction thereto, Section

74D did not contain the words or the language

providing for an opportunity of hearing and

therefore the contention of Mr.Joshi that the order

was bad because of violation of principles of

natural justice was not correct. She relied on the

decision in the case of Dr. Umraosingh

Choudhary v. State of Madhya Pradesh and

Anr. reported in (1994) 4 SCC 328. She would

rely on paragraphs 4 and 5 thereof.

C/SCA/14948/2020 CAVJUDGMENT

4.4 Ms. Vyas also relied on the decision in the

case of Union of India v. Col. J. N. Sinha and

Anr. 1970 (2) SCC 458. She would rely on para

6 thereof to submit that not in every case

principles of natural justice ought to be followed.

Reliance was also placed on the decision

rendered in Special Civil Application No.519 of

2010 dated 09.02.2010 in which case the Court

had justified exercising of powers under Section

74D of the Act, wherein, in circumstances similar

to the present case, the Court had approved the

action of the authorities in appointing the District

Registrar.

5. Having considered the submissions of the

learned advocates for the respective parties,

reading of the order dated 05.09.2020 with the

order in Revision dated 03.11.2020, the same

would indicate the following circumstances.


i.     That the election of the society was held on






        C/SCA/14948/2020                                CAVJUDGMENT



        31.03.2019 by the Custodian.

 ii.    The Committee consisted of 11 members.

iii.    Of       the      11   members,           on    the       basis         of

        statements             recorded           by     the          District

Registrar, a finding of fact was arrived at by

the authority which was so confirmed by the

Revisional Authority that on 11.06.2020 two

members had resigned, on 26.06.2020, four

members had resigned. It was on the basis

of these resignations that the society itself

had approached the Registrar requesting

that now that there was no Coram existing,

there was no committee that was functioning

and therefore a Custodian needed to be

appointed. This was a case where if the

language of Section 74D is read, the second

circumstance squarely applies to the facts of

the case inasmuch as no legally constituted

Committee continued to function after the

elections. It was in inevitable for the District

Registrar to appoint a Custodian.

       C/SCA/14948/2020                               CAVJUDGMENT



iv.    As far as the contention of the learned

counsel for the order being bad on violation

of principles of natural justice, this Court in

case of Banaskantha District Cooperative

Milk Producers' Union Ltd. (supra) in

paragraph no.20 of the judgment having

considered the old provisions of Section 74D

with the amended provisions of Section 74D

has categorically held that in the amended

provision of Section 74D, the word 'shall' is

used for the Registrar to exercise powers for

appointment of custodian. The

reasons/grounds for such exercise of powers

are the same in the amended provisions of

Section 74D as there were Sections 74D

when amended by the Gujarat Act 1 of 2008.

What the Court held was that for any reason

if a new committee or the management for

any reason whatsoever is not elected before

the expiry of the term or that such

Committee having been held is not

C/SCA/14948/2020 CAVJUDGMENT

functioning, as is the case on hand in the

present petition, it is not possible to read the

obligation of affording hearing in the present

provisions of Section 74D of the Act before

the order of appointment of the Custodian is

made by the Registrar under Section 74D of

the Act because if such an opportunity of

hearing was to be given, the intention of the

legislature would stand frustrated. The

submission of Shri Joshi that this judgment is

per-incurium inasmuch as the Division Bench

decision in the case of Amreli District

Cooperative Sale and Purchase Union

Ltd. (supra) held otherwise, what learned

counsel Shri Joshi lost sight of the fact is that

in case of Banaskantha District

Cooperative Milk Producers' Union Ltd.

(supra) was considering the amended

provision as compared to the unamended

provision that was considered in case of

Amreli District Cooperative Sale and

C/SCA/14948/2020 CAVJUDGMENT

Purchase Union Ltd. (supra).

v. In context of the submission made by Shri

Joshi that a representation was made by Shri

Ghanshyambhai who was an outsider, and a

person having no locus, perusal of the order

of the District Registrar would indicate that it

was not a sole circumstance on which the

custodian was appointed. The society itself

had made an application requesting that a

custodian be appointed. As far as legal

mala-fide are concerned, merely because the

sitting MLA of the constituency in which the

society is situated made an application for

appointment of custodian, without any

detailed adjudication or allegation of proof of

mala-fide which have easily made them

prove, no such motive can be attributed to

the District Registrar inasmuch as to fault

the passing of the order to be mala-fide or on

the basis of extraneous consideration.

vi.    With regard to the challenge to the order






 C/SCA/14948/2020                                CAVJUDGMENT

being bad on the ground of violation of

principles of natural justice, or that the

ingredients of Section 74D would not be

attracted, it will be in the fitness of things to

consider the decision of this Court rendered

in Special Civil Application No.519 of 2010

dated 09.02.2010. It being a short order, it

will be worthwhile to quote the decision as a

whole. Order dated 09.02.2010 passed in

Special Civil Application No.519 of 2010

reads as under:

"1. The petitioner by this petition challenges the order passed by the District Registrar and its confirmation thereof by the State Registrar and the rejection of the application for stay by the State Government whereby the appointment of custodian under Section 74D of the Gujarat Cooperative Societies Act (hereinafter referred to as 'the Act') is made and is not stayed.

2. Heard Mr. Chauhan, learned counsel appearing for the petitioner, Mr.Jani, learned Government Pleader for the State Authorities, Mr. Ashish Shah for respondent No.3 and Mr. Manish Shah for respondent Nos. 4 to 11. The other respondents are served but they have chosen not to appear.

C/SCA/14948/2020 CAVJUDGMENT

3. The contention raised on behalf of the petitioners is that out of 15 members of the Managing Committee, 9 persons are in power and therefore the Registrar could not have exercised the powers for appointment of the custodian under Section 74D of the Act. It was submitted that out of total originally 15 persons, one member had incurred disqualification and the same was automatic and therefore there was cooption by the Committee. Mr. Chauhan submitted that the representation made by 8 persons to the District Registrar for appointment of the custodian is not properly considered by the Registrar in as much as out of those 8 persons, two persons have already resigned and their resignations have accepted and one person had incurred the disqualification. The other remaining members have already co- opted three members and as a result thereof the total strength of the existing member is 9 and it cannot be called non quorum. Under these circumstances, the exercise of the powers is beyond the scope and ambit of Section 74D of the Act, therefore this Court may interfere.

4. Having considered the above, the pertinent aspect deserves to be recorded is that the petitioners have not produced the material or record to show that whether they were elected members or the selected members of the society. If the petitioners were selected members by the General Body of the society and not elected, the consequence would arise of no election after it became due and the power under Section 74D of the Act cannot be

C/SCA/14948/2020 CAVJUDGMENT

said as unwarranted.

5. Even if it is considered that the petitioners were elected members then also total number of persons elected is fifteen out of which eight persons i.e. more than majority applied to the District Registrar for appointment of the custodian. The consequential effect would be that the remaining members would be seven, which will be less than the quorum for functioning of the Managing Committee. As per bye law No.34(3), copy whereof is produced at page 21, the quorum is more than half of the members of the Managing Committee, therefore for constitution of a valid quorum, minimum number of persons should be eight whereas in the group of the petitioners only six persons are the elected members. Such being the position, if the exercise of the powers is made by the District Registrar for appointment of the custodian under Section 74D of the Act, the same cannot be said to be unreasonable or arbitrary because the Managing Committee will not be able to function in view of the aforesaid bye law.

6. The attempt to contend that one person had automatically disqualified himself or that two persons had resigned are disputed questions of facts in as much as if a person has incurred disqualification and he does not vacate the office, the procedure under Rule 32 of the Gujarat Cooperative Societies Rules is required to be followed which has admittedly not followed in the present case. Further, the persons who stated to have resigned, they

C/SCA/14948/2020 CAVJUDGMENT

themselves have denied their signature and resignation having been tendered. Not only that but the criminal complaint is also filed for fabrication and concoction of such resignation. Under these circumstances, if the lower authorities have prima facie arrived at the conclusion that the say for resignation and of automatic disqualification cannot be accepted, such an approach on the part of the authority cannot be said to be unreasonable or arbitrary.

7. As observed earlier if the aforesaid three persons are treated in the Committee, the consequence would be that the co-option of three persons would be rendered invalid and the second consequence would be that out of fifteen elected members there will be only seven elected members which will be less than the requisite quorum resulting into disability of the Managing Committee to function. Under these circumstances, if the appointment of the custodian is made, such cannot be said to be unreasonable or arbitrary.

8. Apart from the above, in any case, as per the amended provisions of Section 74D of the Act, it will be required for the Registrar to hold the election within a period of two months, therefore no prejudice will be caused.

9. In view of the aforesaid, no case is made out for interference. It is clarified that the aforesaid reasons are recorded since the contentions were raised and appropriate order was invited, but the State Government will be at the liberty

C/SCA/14948/2020 CAVJUDGMENT

to take independent view of the matter at the time of final hearing of the Revision without being influenced by the observations made by this Court in the present order. Rejected accordingly."

vii. Accordingly what is apparent on reading the

order of the District Registrar so confirmed in

Revision by the Additional Registrar is that

after the elections of the Committee were

held on 31.03.2019, a series of resignation

followed, six members resigned out of 11,

leaving the committee nonfunctional by

virtue of it having only five members. On

appreciation of facts, the Registrar has found

that there was no coram and therefore the

submission of Mr.Baiju Joshi relying on the

bye-laws is also misconceived.