Gujarat High Court
Patel Gaurangbhai Naranbhai vs State Of Gujarat on 7 May, 2021
Bench: J.B.Pardiwala
C/LPA/430/2020 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 430 of 2020
In
R/SPECIAL CIVIL APPLICATION NO. 7539 of 2020
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2020
In
R/LETTERS PATENT APPEAL NO. 430 of 2020
With
CIVIL APPLICATION (FOR JOINING PARTY) NO. 2 of 2020
In
R/LETTERS PATENT APPEAL NO. 430 of 2020
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MR. JUSTICE VIKRAM NATH Sd/
and
HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/
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1 Whether Reporters of Local Papers may be allowed Yes
to see the judgment ?
2 To be referred to the Reporter or not ? Yes
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 ?
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PATEL GAURANGBHAI NARANBHAI
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR. PRAKASH JANI, LD. SR. COUNSEL WITH MR. ARCHIT JANI, LD
ADVOCATE WITH MR. SHIVANG P JANI(8285) for the Appellant(s) No. 1
MS. MANISHA LUVKUMAR SHAH, LD. GOVERNMENT PLEADER WITH
MS. AISHWARYA GUPTA, LD AGP (99) for the Respondent(s) No. 1
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CORAM: HONOURABLE THE CHIEF JUSTICE MR. JUSTICE
VIKRAM NATH
and
HONOURABLE MR. JUSTICE J.B.PARDIWALA
Date : 07/05/2021
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)
1. This Letters Patent Appeal under clause 15 of the
Letters Patent is at the instance of an unsuccessful writ
applicant of a writ application and is directed against the
judgement and order passed by a learned Single Judge of
this Court, by which, the learned Single Judge rejected the
writ application filed by the writ applicant (appellant
herein) and thereby declined to interfere at the stage of a
show cause notice issued by the Registrar, Cooperative
Societies, State of Gujarat.
2. The facts giving rise to this appeal may be
summarized as under:
2.1 The appellant herein filed the Special Civil Application
No.7539 of 2020 with the following prayers:
"(A) This Hon'ble Court may be pleased to issue writ
of certiorari quashing and setting aside the show-
cause notice issued by the respondent bearing
no.MSB/ 01/TP/6296/2020 dated 19th March 2020
which is at Annexure-J to this petition and be further
pleased to quash and set aside the communication
dated 27th May, 2020 which is at Annexure-L to this
petition.
(B) Pending admission hearing and final disposal of
this petition, this Hon'ble Court may be pleased to
stay the operation, implementation and execution of
the notice dated 19th March, 2020 and be further
pleased to stay proceedings arising out the show
cause notice which is at Annexure-J to this petition
and be further pleased to stay the communication
dated 27th May, 2020 which is at Annexure-L to the
petition;
(C) This Hon'ble Court may be pleased to grant
such other and further relief/s and/or order as
deemed fit in the facts and circumstances of the case
and in the interest of justice."
2.2 The Mehsana District Central Cooperative Bank
Limited, Mehsana is a specified cooperative society within
the meaning of the Gujarat Cooperative Societies Act,
1961 (for short, "the Act, 1961"). The Mehsana District
Central Cooperative Bank Limited came to be registered
on 9th March 1950. The Bank has its bye-laws approved by
the Registrar.
2.3 Under the bye-law No.32(1) of the Bank, the
Committee of the Cooperative Bank (Bank Management
Board) consists of 19 members. 10 members get elected
from the different constituencies of the area of operation
of the Mehsana District Central Cooperative Bank Limited
from amongst the primary agriculture cooperative
societies, who are the members of the Bank.
2.4 In the context of the above referred 10 seats, the
voters are the primary agricultural cooperative societies
situated in the different constituencies and who are the
members of the Mehsana District Central Cooperative
Bank. These primary cooperative societies would pass the
resolution on the eve of the election of the Mehsana
District Central Cooperative Bank and would convey the
names of their representatives to the Bank. These
representatives are authorized to vote and contest in the
election. Thus, the primary cooperative societies, through
their representatives, take part in the process of election.
2.5 The bye-law No.32(5)(2)(8)(1) of the Bye-laws of the
Bank prescribes the qualifications and eligibilities to
become a member of the Committee.
2.6 In the case on hand, the election programme for
electing the members of the Committee of the Bank was
published on 19th October 2015.
2.7 It appears from the materials on record that prior to
the declaration of the election programme, the voters list
came to be finalized by the Election Officer in accordance
with the election rules named as the Gujarat Specified
Cooperative Societies Election to Committee Rules, 1982
(for short, "the Rules, 1982"). One Shree Rampura Seva
Sahakari Mandali Limited is one of the members of the
Bank. Shree Rampura Seva Sahakari Mandali Limited had
the audit class B for the period between 1 st April 2013 and
31st March 2014. In the final voters list, the name of Shree
Rampura Seva Sahakari Mandali Limited was shown as the
voter of the Sidhpur constituency as Shree Rampura Seva
Sahakari Mandali Limited was fulfilling the necessary
eligibility criteria. It appears that there is no dispute on
this count. Shree Rampura Seva Sahakari Mandali Limited
resolved to send its representative namely Patel
Gaurangbhai Naranbhai (appellant herein). Shree Rampura
Seva Sahakari Mandali Limited had the audit class B for
the period between 1st April 2013 and 31st March 2015. In
such circumstances, the primary society namely Shree
Rampura Seva Sahakari Mandali Limited was duly qualified
to send its representative as the voter and its
representative was qualified to contest the election in
accordance with the provisions of the Act, 1961 and the
bye-laws. Such factual position has also not been disputed
by any of the contesting respondents.
2.8 The appellant herein being a nominee -
representative of Shree Rampura Seva Sahakari Mandali
Limited filed his nomination form to contest the election as
a member of the Committee of the Bank, which took place
on 19th November 2015. The appellant herein came to be
declared elected on 19th November 2015 as a member of
the Committee from the Siddhpur seat. The appellant
herein started functioning as the member of the
Committee of the Bank. It is not in dispute that the
appellant has not incurred any disqualification in his
individual capacity, which would disentitle him to function
as the member of the Committee of the Bank.
2.9 It appears from the materials on record that after
three years from the date of election, the Auditor gave
audit class "D" to Shree Rampura Seva Sahakari Mandali
Limited for the year 2018-2019.
2.10 In such circumstances referred to above, the
Registrar, Cooperative Societies, State of Gujarat,
Gandhinagar issued the impugned show cause notice
dated 19th March 2020, the English translation of the same
reads as under:
"Number MSB/01/TP/6296/2020
Registrar, Co-operative Societies
Gujarat, Block No.10/1,
Dr. Jivraj Mehta Bhavan,
Gandhinagar.
Date : 19th March, 2020.
Read:
1. `Application of (1) Patel Sanjaybhai Mafatlal at
village Kamali Taluka Unjha District Mehsana, (2)
Patel Amratlal Mulchanddas at village Hajipur Taluka
Unjha District Mehsana, (3) Patel Ambalal Joitaram at
village Khatasana Taluka Unjha District Mehsana.
2. Letter of District Registrar, Co-operative
Societies, Mehsana dated 16th March, 2020 bearing
no.SB/1/G-2/44/958.
3. The provisions of the Gujarat Co-operative
Societies Act, 1961 namely Section 27 and Section
145F(e) and Rule 32 of the Gujarat Co-operative
Societies Rules, 1965 and bye-laws no.32(6) of the
Mehsana District Cooperative Bank Ltd.
SHOW CAUSE NOTICE
The Mehsana District Central Co-operative Bank Ltd.,
Mehsana is a co-operative society which is registered
on 1st February, 1979 bearing its registration
no.1629. Bank is required to discharge is function by
the board of directors who are required to act in the
interest of the members as for the guidelines,
directives and instructions of the Reserve Bank of
India, NABARD and the guidelines issued under the
Banking Regulations Act, 1949.
Read the letter at Sr. No. 2. By the said letter, the
District Registrar, Cooperative Societies, Mehsana
has sent the propose. In the same, it is stated that if
the provisional voters list of the Mehsana District Co-
operative Bank Ltd. Was prepared on 27th August,
2015 considering the position as on 31 st March, 2015.
For Sidhpur constituency at Sr. No.2, the Rampura
Seva Sahkari Mandli Ltd., village Rampura Taluka
District Mehsana and the name of Shri Patel
Gaurangbhai Naranbhai is shown as the
representative of the co-operative society. The
Election Officer and Deputy Collector, Kadi had
published provisional voters list on 23rd September,
2015 in the name Patel Gaurangbhai Naranbhai is
name is show as representative of the Rampura Seva
Sahkari Mandali Ltd., Rampura Taluka Unjha, District
Mehsana at serial number 2.
The election for 1 seat of Sidhpur constituency of
board of directors of the bank was to take place and
the Election Officer had published the names of valid
candidates on 26th October, 2015 as per Rule 24. The
name of Patel Gaurangbhai Naranbhai is shown as
the validly nominated candidate from Sidhpur
constituency at serial number 1. In the election which
was held Shri Gaurangbhai Naranbhai Patel was
declared elected by the Election Officer in
accordance with Rule 62 and sample no.15. Such
declaration was made on 19th of November, 2015.
Thus, in the election of the Mehsana District Central
Co-operative Bank Ltd. For Sidhpur constituency, Shri
Gaurangbhai Naranbhai Patel came to be declared
elected as representative of the Rampura Seva
Sahakari Mandali Ltd., Rampura Taluka District
Mehsana.
District Registrar, Co-operative Societies, Mehsana
has submitted that audit report of Rampura Seva
Sahakari Mandali Ltd., Rampura for the year 2018-
2019. The audit is carried out from 1st April, 2018 to
31st March, 2019. The auditor has issued the audit
memo to District Registrar office on 19 th August,
2019. As per the said audit memo, Rampura Seva
Sahkari Mandali Ltd. Rampura Taluka is given Audit
Class D.
Section 27(3) of the Gujarat Co-operative Societies
Act, 1961 and provisions of section 145F(e) read as
under:
"27. Right to vote. - (3) No person shall exercise the
right to vote at an election of a member of a
committee in a financial year unless he is a member
of the society for the whole of the financial year
preceding the financial year in which the election is
being held.
Provided that no member society of a federal society
shall exercise the right to vote at an election of a
member of a committee unless such society has its
last accounts audited in class A, B and C. "
"Section 145F(e) if he is also disqualified by or under
any other provision of this Act."
Bye-laws of the Mehsana District Co-operative Bank
Ltd., Mehsana and in particular bye-laws no.32(6)
reads as under:
"If the member co-operative society has Audit
Class C and D, then the representative of the
said society will not be eligible to become
director on the board of directors of the bank."
Rule 32(1)(C) of the Gujarat Co-operative Societies
Rules, 1965 reads as under:
"Rule 32(1)(C) if he is not otherwise disqualified
for appointment as such member."
Considering the above facts and situation and the
provisions of law and the bye-laws of the prima facie
Gaurangbhai Naranbhai Patel has incurred
disqualification to continue as director. Rule 32(1-A)
of the Gujarat Co-operative Societies Rules, 1965
reads as under:
"Rule 32(1-A) A member of a committee who
incurs any of the disqualifications specified in
sub-rule (1) shall vacate the office and if he
does not vacate such office, he shall be
removed by Registrar as such member:
Provided that the Registrar, shall before making
such order of removal, give the person
concerned an opportunity of being heard."
Just considering the aforesaid provisions Patel
Gaurangbhai Naranbhai should have resigned as a
director of the Mehsana District Co-operative Bank
Ltd. However, it is found from the letter at Sr. No.2 of
the District Registrar that Patel Gaurangbhai
Naranbhai has not resigned.
In the above circumstances, Show-Cause Notice is
issued to Patel Gaurangbhai Naranbhai under Rule
32(1-A) of the Gujarat Co-operative Societies Rules,
1965. The undersigned has found that prima-facie
considering the above provisions of law and the bye-
laws of the bank, Shri Patel Gaurangbhai Naranbhai
has incurred disqualification. A notice is given to
Patel Gaurangbhai Naranbhai as to why he should
not be removed. As such he is called to give the
explanation in the month of March, 2020 before the
undersigned.
If you fail to appear and remain present and give and
fail in giving any explanation, it would be understood
that you do not want to say anything about the same
subject and accordingly, whatever the record
available with this office, necessary order will be
passed.
D.P. Desai
Registrar,
Co-operative Societies,
Gujarat,
Gandhinagar."
2.11 Thus, it is the case of the Registrar, Cooperative
Societies that the primary cooperative society namely
Shree Rampura Seva Sahakari Mandali Limited, who had
nominated the appellant as its representative since has
been the Audit Class "D" for the year commencing from 1 st
April 2018 to 31st March 2019 could be said to have
incurred disability to continue as the elected member of
the Committee of the Bank as now the primary society,
who had sponsored the appellant in 2015 as its nominee
has the Audit Class "D".
2.12 It appears from the materials on record that the
Registrar initiated the proceedings at the behest of a
complaint filed by three individuals namely (1) Patel
Amrautbhai Mulchanddas (2) Patel Ambaram Joitaram (3)
Patel Sanjaybhai Mafatlal.
2.13 Acting on the application filed by the three
individuals referred to above, the Registrar called for the
report of the District Registrar. The District Registrar filed
his report on 16th March 2020. The Registrar, Cooperative
Societies issued notice to the appellant herein dated 19 th
March 2020 calling upon the appellant to show cause as to
why he should not be removed as the elected member of
the Committee of the Bank in view of the fact that the
primary cooperative society, who had nominated the
appellant as its representative in the election held on 19 th
November 2015 now has the Audit Class "D" for the year
2018-19. According to the Registrar, the appellant could
be said to have incurred a disability to continue as the
member of the Committee of the Bank.
2.14 It is not the case of the Registrar, Cooperative
Societies that the appellant herein, in his individual
capacity, has incurred any of the disabilities or
disqualification under Section 145F of the Act, 1961 or
Rule 32 of the Rules, 1965 or under the bye-law No.32 of
the bye-laws of the Bank.
3. In such circumstances referred to above, the
appellant had to come before this Court by filing the
Special Civil Application No.7539 of 2020 questioning the
legality and validity of the show cause notice issued by
the Registrar, Cooperative Societies, State of Gujarat.
4. The learned Single Judge adjudicated the writ
application filed by the appellant herein and rejected the
same holding as under:
"10. The bone of contention between Mr.Jani, learned
Senior Counsel and learned GP Ms.Manisha Lavkumar
is whether Sec.27 read with Sec.145(F) (e), Rule 32,
would apply at the initial stage of being voted as a
Director or such a disqualification would enure in the
entire term and therefore in the government's
perception even the continuance of the petitioner as
a Director would now no longer be possible in view of
the disqualification that the petitioner has occurred
by the Society of which he was a member and on the
basis of which he was nominated as an audit
classification `D.'
10.1 Reading Sec.27 of the Act would indicate that a
member of a society can only exercise such rights as
a member of such society under certain requisite
parameters. The proviso to sub sec.3 of Sec.27
indicates that unless the society has its accounts
audited in class A, B or C in the last accounts, no
member of such a society shall exercise the right to
vote at an election of the member of the Committee.
In other words, in the event, the society's audit class
is D, as in the case of the present petitioner's society
- the Rampura Seva Sahakari Mandali Limited, the
petitioner's society and he being a member of
society, would have no right to vote at an election.
11. Considering the facts on hand and reading the
submissions in the petition it would indicate that the
petitioner was nominated by the Rampura Seva
Sahakari Mandali Limited on the voters list of the
Mehsana District Central Cooperative Bank Limited.
His name was sent as a nominee of the society for
the elections to the Bank. According to the petitioner,
he fulfilled the requirement and eligibility as a
candidate to contest the election of the Mehsana
District Central Cooperative Bank Limited and,
therefore, filed his nomination, his nomination was
held to be valid and on the basis of this, he was
elected to the Board of Directors of the Managing
Committee of the Bank.
12. Sec.145(F) of the Act provides for
disqualification of membership. Reading of the
section which is reproduced hereinabove would
indicate that a person shall be disqualified for being
elected as and for being a member of the committee
of any specified society if he is also disqualified by or
under any other provisions of the Act. In other words,
apart from he being disqualified on being employed
as a salaried employee of the society or any
conviction or having been found guilty of any corrupt
practice, if any other provision under the Act
disqualifies such person from being a member of the
committee of any specified society, the
disqualification for membership shall be attracted. If
this is read in context of the proviso to Sec.27(3)
thereof, reading this with sub clause (e) of Sec.145(F)
(1), it would be a disqualification under sub sec.(3) of
Sec.27 and be a disqualification under that provision
of the Act. The submission of Mr. Jani that the
disqualification has to be at the time of the initial
eligibility also appears to be misconceived. Reading
sub sec.(1) of sec.145(F) would indicate that a person
shall be disqualified from being elected as and for
being a member of the Committee. In other words,
the disqualification enures during the tenure of the
petitioner's eligibility for the entire term as a
Director, because, but for his being eligible as a
member in accordance to proviso of sub sec.3 of
sec.27, the petitioner would not have been
nominated as a Director of the Board of the Bank. By
an audit report of 19.8.2019 when the society on the
basis of an audit classification D, which nominated
the petitioner to be a representative stands
disqualified or ineligible to vote in terms of the
proviso to sub sec.3 of sec.27, the disqualification is
triggered.
12.1 This also finds support on reading Rule 32 of the
Gujarat Cooperative Societies Rules, particularly Rule
32(1-A). One needs to appreciate the fine distinction
that has been made reading Rule 32(1) as compared
to Rule 32(1)-(A) of the Rules. Mr.Jani's submission
would find support if the rule was read in isolation.
True it is that Rule 32(1) when read would provide
that every member of a society who is entitled to
vote shall be eligible for appointment as a member of
the committee. Therefore, Rule 32(1) would support
Mr.Jani's submission. Unfortunately what the learned
counsel for the petitioner has lost sight of is the
provision of sub rule (1-A) of the Rules. Reading Rule
32(1-A) of the Act would indicate that a member of a
committee who incurs any disqualification specified
in sub rule (1) shall vacate the office. In other words,
the word incur when read in context of vacate the
office would unequivocally suggest that such a
disqualification has to happen during the continuance
of an incumbent in his term. Had that not been the
intention, the term "vacate the office", would not find
place in the provisions of the rules. If Mr.Jani's
submission is accepted then the sub rule 1-A would
have no point of being in place in the rules of the
society's act.
12.2 That Rule 32(1-A) is a rule which is invoked and
rightly so, is also finding support when one reads
proviso to Sec.27 sub sec.3 thereof. The proviso
categorically states that no member of a society shall
exercise a right to vote at an election of a member of
a committee unless such society has its last accounts
audited in class A, B or C. Audit of accounts is done
as an exercise at the end of every financial year. The
audited accounts, therefore, would be subject to a
classification accordingly. It is in the context of this
that the term "last accounts" has been used in
Sec.27(3) of the Act. Keeping this spirit in mind, Rule
32(1-A) finds place in the Rules. Therefore, the
submission of Mr. Jani, learned Senior Advocate that
the disqualifications envisaged under the provisions
invoked in the show cause notice are without
jurisdiction because such disqualifications have to be
taken into account only at the initial stage of
appointment is a submission which does not impress
this Court.
13. .The bye laws have been pressed into service by
the Government and the petitioner in support of his
submission. Bye law 32(6) has been pressed into
service by Mr.Jani as not applicable in context of the
submission that I have not agreed to immediately
hereinabove. The bye law, therefore, will have to be
read in conformity with the provisions of the Statute
namely Secs.27, 145(F)(e) and Rule 32(1-A) of the
Act. The submission therefore of Mr.Jani for the
reasons stated immediately hereinabove, does not
warrant acceptance.
14. Though I do not impute any motives on the part
of the petitioner to institute a petition against the
show cause notice and would not therefore deal with
the submission of the learned GP that it isonly after
filing of the petition that the audit report of 19.8.2019
is challenged by way of an appellate remedy on
20.7.2020. This may be one more attempt on the
part of the petitioner to justify his submissions to
support the petition against the show cause notice. I
leave it at that."
5 Being dissatisfied with the judgement and order
passed by the learned Single Judge rejecting the writ
application, the original writ applicant (appellant herein) is
before this Court with the present appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT
(ORIGINAL WRIT APPLICANT):
6 Mr. Prakash Jani, the learned Senior Counsel assisted
by Mr. Archit Jani, the learned counsel appearing for the
appellant vehemently submitted that the impugned
judgement and order passed by the learned Single Judge
is not sustainable in law. Mr. Jani would vehemently submit
that the learned Single Judge ought to have appreciated
an important question of law that the impugned show
cause notice reflects total non-application of mind. He
would submit that the show cause notice suffers from
apparent and deliberate incorrect reading of the facts, the
provisions of the Act, the Rules and the bye-laws. He
would submit that in the absence of any jurisdictional fact,
the show cause notice could not have been issued as the
appellant herein could not be said to have incurred any
disqualification under Section 27(3) of the Act, 1961 read
with Rule 32(1-A) of the Rules, 1965. According to Mr. Jani,
the bye-law No.32(5) (2)(8)(1) of the Bank has no
applicability worth the name in the facts of the present
case.
7. Mr. Jani submitted that the show cause notice came
to be issued by the Registrar, Cooperative Societies at the
behest of the three individuals referred to above and these
three individuals are the political rivals and have no locus
standi. It is pointed out by Mr. Jani that the three
complainants are not even the members of the Committee
of the Bank. They are not even the members of Shree
Rampura Seva Sahakari Mandali Limited. In such
circumstances, the Registrar ought not to have taken
cognizance of the complaint and issued the show cause
notice.
8. The principal argument of Mr. Jani is that the
eligibility criteria of the primary cooperative society to
have Audit Class A and B is to be seen at the time of
preparation of the voters list at the time of election. If the
primary society has the requisite eligibility and
qualification as the Audit Class "A" or "B" at the time of
election and the representative of such society is elected
as the members of the Committee, such representative is
entitled to continue in office for full term of five years. In
the midst of the tenure, if the primary cooperative
society, who had sponsored the appellant, is given the
Audit Class "D", the election of the appellant as the
member of the Committee cannot be disturbed and he
cannot be removed on the ground that the primary
society, who had sponsored the appellant in the year
2015, has now been placed in the category of Audit Class
"C" or "D". It is vehemently submitted by Mr. Jani that the
appellant, in his individual capacity, has not incurred any
disqualification or disability either under the provisions of
the Act or the Rules or the bye-laws.
9. Mr. Jani, in support of his submissions, has placed
strong reliance on the following two decisions:
[1] Gujarat State Cooperative Bank Limited and
others vs. State of Gujarat and others, reported in
2009 (1) GLH 371
[2] Shankerbhai Jesangbhai Chaudhari vs. State of
Gujarat and others, reported in (2016) 2 GLR 1371
10 In such circumstances referred to above, Mr. Jani
prays that there being merit in his appeal, the same be
allowed and the impugned judgement and order passed
by the learned Single Judge be set aside.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS :
11. Ms. Manisha Lavkumar Shah, the learned
Government Pleader assisted by Ms. Aishwarya Gupta, the
learned AGP, on the other hand, has vehemently opposed
the present appeal submitting that no error, not to speak
of any error of law could be said to have been committed
by the learned Single Judge in passing the impugned
judgement and order. According to Ms. Shah, no
interference is warranted with the impugned judgement of
the learned Single Judge.
12. The submissions canvassed by Ms. Shah may be
noted as under:
[1] The writ application came to be filed at a premature
stage. The show cause notice issued by the Registrar,
Cooperative Societies, State of Gujarat could not have
been challenged by way of a writ application as the
Registrar could be said to have the jurisdiction to issue
such a show cause notice. According to Ms. Shah, the
appellant should have filed an appropriate reply to the
said show cause notice and should have appeared before
the authority concerned.
[2] It is argued that the society from which the appellant
was nominated to the post of Director of the Bank has
been downgraded from the Audit Class "C" to Audit Class
"D" on 19th August 2019. The show cause notice came to
be issued on 19th March 2020. The writ application was
filed in the month of June I.e. almost after a year with a
view to avoid appearing before the authority concerned.
The appeal against the Audit Report came to be filed on
20th July 2020.
[3] Section 27 of the Act, 1961 was amended in 2015 to
include the Clause (3), the proviso thereto and Clause (4).
The Statement of Objects and Reasons for the same
provides as follows:
"The State Government has enacted the Gujarat Co-
operative Societies Act, 1961, relating to the co-
operative societies in the State of Gujarat. After the
said Act came into force, the amendments have been
made therein many a times. However, in order to see
that the administration and the management of the
co-operative societies is run still in a better way and
that the co-operative societies strictly follow the
provisions of the Act and the interests of the
members of the society are protected, it is
considered necessary to make certain amendments
in the Act. Accordingly, a provision is made to the
effect that no person shall have a right to vote at an
election of a member of a Committee unless he is a
member of the society for whole of the preceding
financial year, however, in case of a member society
of a federal society, it will have such right to vote
only if such society has its last accounts audited in
class A, B or C."
[4] Section 27 (3) of the Act of 1961, clearly states that
no person shall exercise the right to vote at an election of
a member of a Committee in a financial year unless he is a
member of the society the whole of the financial year,
preceding the financial year in which the election is being
held and such society has its last account audited in Class
A, B or C.
[5] Rule 32 of the Rules of 1965, states that every
member who is entitled to vote shall be eligible for
appointment as a member. This implies that the moment
the member loses the right to vote, he loses his eligibility
to be appointed as a member. Section 145-F(e) of the Act
provides for disqualification for membership. As per the
said section, a person shall be disqualified for being
elected as and for being member of the Committee of any
specified society if he is also disqualified by or under any
other provision of this Act. Rule 32 (1-A) provides that a
member of the Committee, who incurs any of the
disqualifications in sub-rule(1) shall vacate the office and if
he does not vacate such office, he shall be removed by
the Registrar as such member. Reference to the Bye-Law
No. 32(6) also becomes imperative that if the audit class
of a member society is downgraded to "C" or "D" in the
last accounts, the representative of such member society
shall have no right to be a part of the Board of Directors.
[6] It is argued that a close reading of Section 145F(1),
r/w Rule 32(1-A) would make the legislative intent amply
clear that the eligibility criteria prescribed is not a one-
time event. It ensures even for "being a member". It is
submitted that if Rule 32(1-A) is read closely, the said rule
makes a mention regarding "incurring" of disqualification"
"the vacating of office". This clearly indicates the
legislative intent, that the qualification which has been
prescribed by the statute is of a nature that needs to be
present continuously. The very fact that Rule 32 (1-A)
provides or contemplates a situation of vacation of office,
itself indicates that the disqualification can take place any
time within the period of five years. This is further evident
from the fact that Section 27(3) of the Act and the Bye-
Law No. 32(6) use the phrase "last account". Therefore,
the same implies a continuous liability to remain eligible.
[7] The qualification as prescribed under the statute
(Section 27) is such that it needs to be present throughout
the tenure of the Director of the Managing Committee and
to say that the requirement of the qualification would be
applicable only to the year when the appellant became a
Director would be a misnomer. The argument of the
appellant that the requirement of the grade of the audit
class is to be seen on the date when he was elected as a
Director to the Board of the Director, I.e. in the year, 2015
and the same is not a requirement which should be
present for a continuous period of five years, stands
countered.
[8] A conjoint reading of Sections 27 and 145-F(e) of the
Act, would indicate that once the society of the appellant
has been downgraded to the Audit Class "D", the society
itself loses right to vote. Therefore, the appellant also
stands to have incurred the disqualification, further
validating the action of the respondent authority in issuing
the show-cause notice dated 19th March 2020.
[9] The whole purpose of the above referred provisions is
to ensure that the Directors come from stable societies
and further to keep the defunct societies out. In this
regard, some data pertaining to the Mehsana District
Cooperative Bank has been relied upon as under:
Sr. No. Particulars Amounts
(Rs./Lakh)
1 Total members 2993
A) Cooperative societies 1988
B) Individuals 1005
2 Turn over 3,65,7687.02
(01-04-2019 to 31-03-2020)
3 Average working capital 184012.37
4 NABARD Refinance
Sanction and withdrawal 48400.00
Outstanding as on 1378
31.03.2020
5 Advances
Disbursement (issue) 130809.04
Outstanding as on 83338.40
31.03.2020
6 Deposit as on 31.03.2020 142716.58
7 Borrowing as on 31.03.2020 0.00
Of which nominated 4
members
[10] According to Ms. Shah, a conjoint reading of
Sections 27 and 145-F(e) of the Act, 1961 and Rules 32(1)
(c) and Rule 32(1-A) of the Gujarat Cooperative Societies
Rules, 1965 and the bye-law No.32(6) of the bye-laws of
the Mehsana Cooperative Bank clearly indicate that the
society of the appellant once having been degraded to the
Audit Class "D", the show cause notice dated 19 th March
2020 issued to the appellant is just, proper and valid.
13. In such circumstances referred to above, Ms. Shah
prays that there being no merit in the appeal, the same
may be dismissed.
14. The learned counsel appearing for the parties also
invited our attention to the following provisions of law.
15 Chapter III of the Act, 1961 is with respect to the
members and their right and liabilities. Section 27(3)
reads as under:
"27. Right to vote. - ......
(3) No person shall exercise the right to vote at an
election of a member of a committee in a financial
year unless he is a member of the society for the
whole of the financial year preceding the financial
year in which the election is being held.
Provided that no member society of a federal society
shall exercise the right to vote at an election of a
member of a committee unless such society has its
last accounts audited in class A, B and C. "
16. Section 145F reads thus:
"145F. Disqualification for membership. (1) A person
shall be disqualified for being elected, as, and for
being & member of the committee of any specified
society;
(a) if he is a salaried employee of any society (other
than & society of employees themselves) or holds
any office of profit under any society, except when
he holds or is appointed to the office of & Managing
Director or any other office under the society
declared by the State Government by general or
special order not to disqualify its holder;
(b) if he has been convicted of an offence punishable
under Section 153-A or Section 171-E or Section 171-
F or sub-section (2) or sub-section (3) of Section 505
of the Indian Penal Code, 1860 (XLV of 1860), or
under Section 145-R or clause (21) of subsection (2)
of Section 145-S of this Act, unless a period of six
years has elapsed since the date of his conviction;
(c) if he has been convicted by a Court in India for
any offence and sentenced to imprisonment for not
less than two of five years has elapsed since his
release;
(d) if he is found guilty of a corrupt practice under
this Chapter by the State Government unless a
period of six years has elapsed since the date on
which the decision of the State Government takes
effect;
(e) if he is also disqualified by or under any other
provision of this Act.
[(1-A) (i) (a) No member of a society in the Central
Co-operative Bank and the State Co-operative Bank
shall be eligible to be elected as a member in the
committee if he is in default for a period of twelve
months in payment of dues to the society;
(b) no person elected as a member of a society in the
Central Co-operative Bank and the State Co-
operative Bank shall be continued as a member if he
is in default for a period exceeding twelve months in
payment of dues to the society unless the amount in
default with due interest is paid to the society;
(c ) no member of a Primary Agricultural Credit
Cooperative Society shall be eligible to be elected as
a member in the committee of the State Co-operative
Bank or a Central Cooperative Bank if the society is
in default in payment of dues to the cooperative
bank unless the default with due interest is paid to
the co-operative bank;
(d) no member of a non-credit society who is a
member in the committee of a Central Co-operative
Bank or the State Cooperative Bank shall be
continued as such member if the society commits
default for a period exceeding 90 days in payment of
dues to the bank.
(ii) The above provisions shall be in addition to and
not in derogation of any other provisions for
disqualification contained in this Act.]
(2)Any salaried employee of a society who was as
member of the committee of a specified society
immediately before the commencement of the
Gujarat Cooperative Societies (Amendment) Act,
1981 (6 of 1981), shall not be disqualified, and he
deemed never to have been disqualified, under
clause (a) of sub-section (1), if he was at that time
holding any office saved from disqualification under
the said clause (3) and shall continue to be such
member for such period or subject to such term and
conditions for which or on which he would have
otherwise continued as such manner, and anything
done or any action taken by such person shall be
deemed to be duty done or any action taken by such
person shall be deemed to be duly done or taken and
the committee shall be deemed to be properly
constituted, and such thing done or action taken
shall not be called in question in any Court or
authority on the ground only that the committee was
not properly constituted or that the person was
disqualified to continue as a member.
(3) Notwithstanding anything contained in clause
(b) or (c) of sub-section (1), disqualification under
either clause shall not, in the case of a person who
on the date of the conviction is a member of any
specified society, take effect until three months have
elapsed from that date or in within that period as
appeal or application for revision is brought in
respect of the conviction or the sentence until that
appeal or application is disposed of by the Court."
17. Rule 32 of the Rules 1965 reads thus:
"32. Qualification for the members of the
committee . - (1) Every member of a society who is
entitled to vote shall be eligible for appointment as a
member of a committee thereof if-
(a) he is not in default in respect of any loan taken by
him for such period as is specified in the bye-laws, or
(b) he has not directly or indirectly any interest in
any subsisting contract made with the society or in
any property sold or purchased by the society or any
other transaction of the society except in any
investment made in or any loan taken from the
society, or
(c) if he is not otherwise disqualified for
appointment as such member, [or]
[(d) he is not held responsible under Section 82, or
(e) no order for recovery of costs made against him
by a Magistrate under Section 91, or
(f) no order is made against him under Section 93, or
(g) if he is not found guilty of any of the offences
under Section 147 or any offence under Section 403
of the Indian Penal Code in respect of the property of
any society.]
[(1-A) A member of the committee who incurs any of
the disqualifications specified in sub-rule (1) shall
vacate the office and if he does not vacate such
office, he shall be removed by Registrar as such
member:
Provided that the Registrar, shall before making such
order of removal, give the person concerned an
opportunity of being heard.]
[(2) Notwithstanding anything contained in sub-
rule(1),
(a) in case of societies dispensing with credit, on
person who does money lending business shall be
eligible for appointment as a member of the
managing committee of the society.
(b) a member of a society, who carries on business of
the kind carried on by the societies of which he is the
member, shall not be eligible to be the member of
any committee of that society within the sanction of
the Registrar.
(3) Where any person becomes a member of a
Committee of a society in contravention of sub-rule
(2) he shall be removed from office as a member of
such committee by the Registrar.
Provided that the Registrar shall, before making
order of removal, give the person concerned an
opportunity of being heard.]"
18. The relevant by-law No.32(6) of the Bye-laws reads
thus:
"If the member cooperative society has the audit
class "C" and "D", then the representative of the said
society shall not be eligible to enter to become the
Director on the Board of Directors of the Bank."
ANALYSIS
19. Having heard the learned counsel appearing for the
parties and having gone through the materials on record,
the only question that falls for our consideration is
whether the learned Single Judge committed any error in
passing the impugned judgment and order.
20. At the outset, we are of the view that the learned
Single Judge should have refrained himself from going into
the merits of the matter and should have left upon the
authority concerned to adjudicate the show-cause notice
in accordance with law. We are of the view that the
impugned judgment passed by the learned Single Judge
has left nothing for the authority concerned now to
adjudicate. The learned Single Judge could be said to
have given the final verdict that the appellant stood
disqualified as the member of the Committee. It would
now be absolutely an empty formality for the authority
concerned to proceed further with the show-cause notice.
21. The Supreme Court in the case of Srinivasa Rice
Mills vs. ESI Corporation, reported in (2007) 1 SCC 705
has observed in Para-84 as under;
"..... it is clear that existence of jurisdictional fact is
sine qua non for the exercise of power. If the
jurisdictional fact exists, the authority can proceed
with the case and take an appropriate decision in
accordance with law. Once the authority has
jurisdiction in the matter on existence of
jurisdictional fact, it can decide the 'fact in issue' or
'adjudicatory fact'. A wrong decision on 'fact in issue'
or on 'adjudicatory fact' would not make the decision
of the authority without jurisdiction or vulnerable
provided essential or fundamental fact as to
existence of jurisdiction is present".
22. What is "jurisdictional fact" has been explained by
the Supreme Court in paragraphs 68, 69 and 70 in
Ramesh Chandra Sankla and others vs. Vikram
Cement and others, (2008) 14 SCC 58, which are
reproduced as under;
"68. A "jurisdictional fact" is one on the existence of
which depends the jurisdiction of a court, tribunal or
an authority. If the jurisdictional fact does not exist,
the court or tribunal cannot act. If an inferior court or
tribunal wrongly assumes the existence of such fact,
a writ of certiorari lies. The underlying principle is
that by erroneously assuming existence of
jurisdictional fact, a subordinate court or an inferior
tribunal cannot confer upon itself jurisdiction which it
otherwise does not possess.
69. The counsel referred to a recent decision of this
Court in Arun Kumar v. Union of India, Speaking
for the Court, one of, us (C.K. Thakker, J.) observed:
(SCCp. 758, para 74)
74. A 'jurisdictional fact' is a fact which must
exist before a court, tribunal or an authority
assumes jurisdiction over a particular matter. A
jurisdictional fact is one on existence or
nonexistence of which depends jurisdiction of a
court, a tribunal or an authority. It: is the fact
upon which an administrative agency's power to
act depends. If the jurisdictional fact does not
exist, the court, authority or officer cannot act.
If a court or authority wrongly assumes the
existence of such fact, the order can be
questioned by a writ of certiorari. The
underlying principle is that by erroneously
assuming existence of such jurisdictional fact,
no authority can confer upon itself jurisdiction
which it otherwise does not possess.
It was further observed: (SCC p. 759, para 76)
76. The existence of jurisdictional fact is thus
sine qua non or condition precedent for the
exercise of power by a court of limited
jurisdiction.
70. Drawing the distinction between "jurisdictional
fact" and "adjudicatory fact", the Court stated: (Arun
Kumar case, SCC p. 761, para 84)
84.... It is clear that existence of 'jurisdictional
fact' is sine qua non for the exercise of power. If
the jurisdictional fact exists, the authority can
proceed with the case and take an appropriate
decision in accordance with law. Once the
authority has jurisdiction in the matter on
existence of 'jurisdictional fact', it can decide
the 'fact in issue' or 'adjudicatory fact'. A wrong
decision on 'fact in issue' or on 'adjudicatory
fact' would not make the decision of the
authority without jurisdiction or vulnerable
provided essential or fundamental fact as to
existence of jurisdiction is present.
The principle was reiterated in Carona Ltd. V.
Parvathy Swaminathan & sons. "
23. Thus, before a statutory authority proceeds to
exercise its statutory power to make a decision, he or she
must properly identify and consider the possibility that it
may involve a jurisdictional fact. To put it simply, the
jurisdictional facts are facts which must objectively exist
before a statutory power can be exercised by a decision
maker.
24. The Supreme Court in Special Director vs. Mohd.
Ghulam Ghouse, reported in 2004(3) SCC 440, at
paragraph 5, held as follows;
"This Court in a large number of cases has
deprecated the practice of the High Courts
entertaining writ petitions questioning legality of the
show-cause notices stalling enquiries as proposed
and retarding investigative process to find actual
facts with the participation and in the presence of the
parties. Unless the High Court is satisfied that the
show-cause notice was totally non est in the eye of
the law for absolute want of jurisdiction of the
authority to even investigate into facts, writ
petitions should not be entertained for the mere
asking and as a matter of routine, and the writ
petitioner should invariably be directed to respond
to the show-cause notice and take all stands
highlighted in the writ petition. Whether the show-
cause notice was founded on any legal premise, is a
jurisdictional issue which can even be urged by the
recipient of the notice and such issue also can be
adjudicated by the authority issuing the very notice
initially, before the aggrieved could approach the
court. Further, when the court passes an interim
order it should be careful to see that the statutory
functionaries specially and specifically constituted for
the purpose are not denuded of powers and authority
to initially decide the matter and ensure that
ultimate relief which may or may not be finally
granted in the writ petition is not accorded to the
writ petitioner even at the threshold by the interim
protection granted."
25. In Union of India vs. Kunisetty Satyanarayana,
reported in 2006 (12) SCC 28, the Supreme Court, held
that:
"15. Writ Jurisdiction is discretionary jurisdiction and
hence, such discretion under Article 226 should not
ordinarily be exercised by quashing a show-cause
notice or charge-sheet"
26. The expression 'jurisdiction' has a well settled legal
connotation. It means authority to hear or determine the
controversy. The concept of jurisdiction is the power to
hear and determine the cause. The Supreme Court in
'ANOWER HUSSAIN VS. AJOY KUMAR', AIR 1965 SC 1651
has held that the expression 'jurisdiction' does not mean
power to do or order the act impugned, but generally the
authority of Judicial Officer to act in the matter. It has been
held that expression 'jurisdiction' means the entitlement
to enter upon the enquiry in question [See:'M.L.SETHI VS.
R.P.KAPUR', AIR 1972 SC 2379]. The Supreme Court while
dealing with the expression 'jurisdiction' in celebrated
case of 'A.R.ANTULAY VS. R.S.NAYAK', AIR 1988 SC 1531
held that jurisdiction is the authority or power of the court
to deal with the matter and make an order carrying the
binding force.
27. The scope of interference with regard to show cause
notices is well settled by catena of decisions of the
Supreme Court. If a show cause notice is issued under a
statutory provision, the courts should be reluctant to
interfere with the notice at that stage unless the notice is
shown to have been issued palpably without any authority
of law. [See: 'STATE OF UTTAR PRADESH VS. BRAHMA
DUTTA SHARMA AND ANOTHER', AIR 1987 SC 943]. It has
further been held that unless show cause notice is ex facie
a nullity or is totally without jurisdiction i.e., where the
commencement of the proceeding itself is unauthorized,
at that stage, it should be shown that authority had no
power or jurisdiction to enter upon enquiry and in all other
cases, the party must respond to the show cause notice.
[See:'EXEUCTIVE ENGINEER, BIHAR HOUSING BOARD VS.
RAMESH KUMAR SINGH', (1996) 1 SCC 327]. In 'UNION OF
INDIA VS. HINDUSTAN DEVELOPMENT CORPORATION
LTD.,', (1998) 9 SCC 576, it has been that where the show
cause notice requires investigation of facts, the Court
should not interfere and the matter should be decided by
the authorities. It has been held where the authority lacks
jurisdiction, show cause notice can be quashed.
[See:'UNION OF INDIA VS. HINDALCO INDUSTRIES', (2003)
5 SCC 194]. Similar view has been taken in 'DIVISIONAL
FOREST OFFICER VS. M.RAMLINGA REDDY', (2007) 9 SCC
286 and 'UNION OF INDIA VS. VICO LABORATORIES',
(2007) 13 SCC 270. It has further been held that High
Court should be extremely circumspect while dealing with
a writ petition, in which a challenge is made to the show
cause notice. [See:'COMMISSIONER OF CUSTOMS VS.
COVAI RAJA AND METALS (INDIA) (P) LTD.,', (2018) 2 SCC
398].
28. Thus, in some very rare and exceptional cases, the
High Court may quash a show-cause notice if it is found to
be wholly without jurisdiction or for some other reason, if
it is wholly illegal. However, ordinarily, the High Court
should not interfere at the stage of a show-cause notice ,
more particularly, if there is some jurisdictional fact
involved in the show-cause notice. To put it in other words,
if a show-cause notice has been challenged by way of a
writ application, then in such circumstances, the Writ
Court should look into two vital aspects, i.e, (i) whether
the show-cause notice has been issued by the authority
empowered in law. In other words, whether the authority
is competent to issue such show-cause notice and (ii)
whether the show-cause notice issued is with or without
jurisdiction. If the authority, issuing the show-cause notice,
has no power to issue such notice, then there should not
be any problem for a Writ Court to quash the notice.
However, if the authority has the power in law to issue
the notice, then the second consideration should be
whether the same could be said to be without jurisdiction
or not. To determine the issue of jurisdiction, what is
necessary for the Court to first look into whether there
exists any "jurisdictional fact", before the authority
assumes jurisdiction over a particular matter. If the
jurisdictional fact exists, the authority can proceed with
the case and take an appropriate decision in accordance
with law.
29. In the case on hand, prima facie we find force in the
principal argument of Mr. Jani that no action would lie
against a person, who holds elected office by virtue of an
election and one who is not removable by the elector
cannot be removed by issuance of the impugned show-
cause notice lacking jurisdictional fact, unless one has
incurred the disqualification to hold the elected office
specifically provided by any statutory law enacted
thereunder. Disqualification cannot be read into the
proviso to Clause (3) of Section 27 of the Act implicitly or
by process of reasoning and presumptions, howsoever
moralistic, ethical, desirable, high-sounding, they may be.
However, as discussed above, we refrain ourselves from
expressing any opinion on the merits of such submission.
We leave it absolutely open to the authority concerned to
apply his independent mind and take an appropriate
decision strictly in accordance with law without being
influenced, in any manner, by any of the observations
made by the learned Single Judge in its impugned
judgment and order. We repeat that the adjudication
should reflect independent application of mind.
30. Having taken the view that the learned Single Judge
should not have entertained the writ application on merits,
we could have set aside the impugned judgment and
order passed by the learned Single Judge and remitted the
matter to the authority concerned for adjudication.
However, instead of doing so, we deem it appropriate to
observe that it shall be open to the appellant to file
appropriate reply to the show-cause notice taking up all
the contentions available to him in law and the
adjudicating authority shall consider the same strictly in
accordance with law and dispose of the matter without
being influenced, in any manner, by any of the
observations made by the learned Single Judge in its
impugned judgment and order.
31. In the over all view of the matter, we decline to
interfere in this appeal and dismiss the same with the
aforesaid observations. The appeal stands dismissed.
The connected civil applications also stand disposed of.
We grant four weeks time to the appellant to file his reply
to the show-cause notice. Once the reply to the show-
cause notice is filed and comes on the record of the case,
then the authority concerned shall fix the hearing of the
matter on a particular date and decide the same in
accordance with law. The authority concerned shall make
all possible endeavor to see that the matter is decided
finally within eight weeks from the date of hearing of the
matter.
(VIKRAM NATH, CJ)
(J. B. PARDIWALA, J)
Vahid
