Gujarat High Court

Bhavnagar Jilla Sahakari Doodh ... vs State Of Gujarat on 30 September, 2022

Bench: Bhargav D. Karia

    C/SCA/3762/2022                               CAV JUDGMENT DATED: 30/09/2022




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                R/SPECIAL CIVIL APPLICATION NO. 3762 of 2022

                                   With
                R/SPECIAL CIVIL APPLICATION NO. 3764 of 2022
                                   With
                R/SPECIAL CIVIL APPLICATION NO. 3794 of 2022

FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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

1 Whether Reporters of Local Papers may be allowed to see the judgment ?

2 To be referred to the Reporter or not ?

3 Whether their Lordships wish to see the fair copy of the judgment ?

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

========================================================== BHAVNAGAR JILLA SAHAKARI DOODH UTPADAK SANGH LTD.

Versus STATE OF GUJARAT & 3 other(s) ========================================================== Appearance:

MR PRAKASJH JANI, SENIOR ADVOCATE WITH MR VIRAL K SHAH(5210)

for the Respondent(s) No. 2,3,4 MR DHAWAN JAYSWAL, AGP for the Respondent(s) No. 1 ==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 30/09/2022

CAV JUDGMENT

C/SCA/3762/2022 CAV JUDGMENT DATED: 30/09/2022

1. Heard learned Senior Advocate Mr. Prakash

Jani assisted by learned advocate Mr.Viral K.

Shah for the petitioner and learned Assistant

Government Pleader Mr. Dhawan Jayswal for the

respondent-State.

2. Rule returnable forthwith. Learned Assistant

Government Pleader Mr. Dhawan Jayswal waives

service of notice of rule on behalf of the

respondent-State.

3. Facts in all these petitions are similar and

they have therefore, been heard analogously

and would be disposed of by this common

judgment. The petitioner as well as the

respondents are common in all these

petitions.

4. For the sake of convenience, facts are

recorded from Special Civil Application

C/SCA/3762/2022 CAV JUDGMENT DATED: 30/09/2022

No.3762/2022.

5. By this petition under Article 226 of the

Constitution of India, the petitioner has

prayed for the following reliefs :

"(A) This Hon'ble Court be pleased to issue a writ of mandamus and/or any other appropriate writ, order or direction, quashing and setting aside the order dated 7.7/8.2020 passed by the Registrar rejecting the application and refusing to grant permission under Section 71 of the Act as also the order dated 20.1.2022 passed by the respondent No.1 rejecting Revision Application No.40 of 2020 and further be pleased to declare that there is no need to get the permission under Section 71 of the Act r/w Rule 29 of the Rules in light of the document produced at Annexure-V to the petition.

Alternatively :

(B) This Hon'ble Court be pleased to issue a writ of mandamus and/or any other appropriate writ, order or direction, quashing and setting aside the order dated 7.7/8.2020 passed by the Registrar as also the order dated 20.1.2022 passed by the respondent No.1 and remand the matter back to the Registrar, so as to give opportunity of hearing to the petitioner, so that the Registrar may consider the document at

C/SCA/3762/2022 CAV JUDGMENT DATED: 30/09/2022

Annexure-V and pass appropriate orders in accordance with law.

(C) During the pendency hearing and final disposal of this petition, this Hon'ble Court be pleased to stay the implementation, execution and operation of the order dated 7.7/8.2020 passed by the Registrar rejecting the application and refusing to grant permission under Section 71 of the Act as also the order dated 20.1.2022 passed by the respondent No.1 rejecting the Revision Application No.40 of 2020.

(D) Any other and further reliefs as deemed just and proper looking to the facts of this case, may kindly be granted in favour of the petitioner, interest of justice."

6. Brief facts of the case are as under:

6.1) The petitioner is a society

registered under the provisions of the

Gujarat Cooperative Societies Act, 1961(For

short, "the Act") and the Gujarat Cooperative

Societies Rules, 1965 (For short "the Rules")

having area of operation as Bhavnagar

District. The petitioner society has about

680 member societies as the petitioner is a

C/SCA/3762/2022 CAV JUDGMENT DATED: 30/09/2022

federal society under the Act. The petitioner

society runs the dairy, namely, Sarvottam

Dairy and has been providing many services

including the milk collecting center,

chilling center, center for maintaining the

milk and other services.

6.2) The petitioner sought permission

under section 71 of the Act from the

respondent to construct two storied chilling

center at Sar on 23.03.2016 along with

resolution dated 26.02.2016.

6.3) On 6.04.2016 the District Registrar

directed the petitioner to apply in a

particular format which was applied on

29.04.2016. On 8.8.2016 the petitioner had

submitted all the enclosures, relevant

documents and further details and particulars

to the District Registrar. Though all the

details and particulars were produced,

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respondent no.4-District Registrar vide

communication dated 6.10.2016 directed the

petitioner to provide further details.

6.4) In the meanwhile, due to huge inflow

of milk from the milk producers' society and

shortage of space at chilling centre, in

anticipation of getting the approval, the

petitioner started the project of

constructing the chilling center. On

8.5.2019, again the entire file with all the

documents related to the project was

submitted to the office of the District

Registrar. The petitioner had also taken

requisite permissions from the different

authorities.

6.5) On 23.05.2019, the petitioner

requested the District Registrar to give the

approval to the project and simultaneously on

22.5.2019 the District Registrar asked for

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further details from the petitioner. On

14.06.2019 the petitioner replied and

submitted check list along with the letter

complying and fulfilling all the particulars

as asked for. On 16.8.2019 a letter was

issued by the District Registrar to provide

further details which was supplied by the

petitioner vide letter dated 26.08.2019.

Again on 5.9.2019, the District Registrar

demanded further particulars which have been

replied by the petitioner on 6.9.2019.

6.6) On 27.9.2019 respondent no.3 Joint

Registrar had informed the petitioner that

there will be scrutiny of the file of the

concerned project for which the petitioner

was called on 11.10.2019. On 20.11.2019, the

proposal of the petitioner had been returned

and the petitioner was asked to submit the

same again by supplying all the details and

particulars. Thereafter again entire file in

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respect of the project was prepared and sent

for approval on 31.2.2020. Again on 4.8.2020,

the petitioner requested the office of the

District Registrar to grant the approval.

6.7) It is the case of the petitioner

that the District Registrar without issuing

any notice and without giving any opportunity

of hearing vide order dated 7.7/8.2020

rejected the application and refused to grant

permission under section 71 of the Act.

6.8) Being aggrieved by such order, the

petitioner preferred Revision Application

No.40 of 2020 before respondent no.1.

Respondent no.1 rejected the revision

application vide order dated 20.1.2022.

6.9) Thereafter it came to the knowledge

of the petitioner that on the basis of letter

issued by the Joint Registrar (Commerce)

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dated 14.10.1999; there is no need to ask for

permission under section 71 of the Act from

the Registrar for expansion of business and

construction. All the three projects of the

petitioner came to an end and the profit of

the petitioner increased and its members

earned dividend @ 15%.

7. Learned Senior Advocate Mr. Prakash Jani for

the petitioner submitted that no opportunity

of hearing is granted by the Registrar while

passing the impugned order denying the

permission under section 71 of the Act

resulting into violation of the principles of

natural justice.

7.1) It was submitted that the project of

the petitioner was a huge project having

stake of Crores of rupees and after following

due procedure of law by publishing the public

advertisement, inviting tenders and getting

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approval from various authorities and village

Panchayat and for the benefit of the members

of the societies, construction was raised and

the project was completed successfully.

7.2) It was submitted that under the

circumstances denial of permission only on

the ground that after completion of the

project, an application was made under

section 71 of the Act is unjust and

unreasonable and the same ought to have been

granted.

7.3) It was submitted that the respondent

authorities were demanding various details

and particulars from the petitioners which

were supplied from time to time and all the

authorities were well aware that the project

was over and despite that details were called

for and at no point of time any of the

authorities have informed to the petitioner

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that permission under section 71 of the Act

would not be granted only on account of

completion of project and not getting prior

permission by the petitioner.

7.4) It was submitted that the findings

arrived at by the respondent authorities is

perverse inasmuch as the implementation of

project to the tune of more than Rs. 50 Crore

is not in dispute and therefore, only on the

ground that the application was made at a

later point of time, permission could not

have been denied to the petitioner.

7.5) Learned Senior Advocate Mr. Jani

submitted that Joint Registrar(Commerce)

issued letter dated 27.09.2019 and thereafter

called the petitioner for scrutiny of the

files on 11.10.2019 and files were returned

on 20.11.2019 and again on 31.1.2020, files

were submitted to the Office of the Registrar

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for granting approval and thereafter, the

impugned order was passed without giving any

opportunity of hearing.

7.6) It was therefore, submitted that

though hearing was given by the Joint

Registrar (Commerce), the impugned order is

passed by the Registrar of the Cooperative

Societies which is not tenable in law as the

person who has granted hearing ought to have

passed the order. It was submitted that after

re-submission of the files, no hearing was

granted and the impugned order was passed

resulting into breach of principles of

natural justice.

7.7) Learned Senior Advocate Mr. Jani

submitted that post facto permission can be

granted under section 71 of the Act as per

the settled legal position considering the

huge investment made by purchasing land,

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machinery and chilling stations have already

been established and are functioning for the

benefit of the members of the petitioner

society. It was therefore, submitted that

District Registrar ought to have granted

permission under section 71 of the Act by

allowing the application filed by the

petitioner.

7.8) It was submitted that the Deputy

Secretary in the order rejecting the revision

application has simply considered that there

is some discrepancy in the resolution passed

by the general body of the society and the

actual cost and did not consider that

supervisors/watchman's cabin and the compound

wall had been constructed and all details and

particulars were produced on record.

7.9) It was submitted that after having

submitted all the details and particulars as

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demanded by the authorities under the Act,

now the Registrar could not have rejected

such application on the ground that after the

project is over, no such permission under

section 71 of the Act can be granted. It was

submitted that the State Government has also

failed to appreciate the said aspect of the

matter and therefore, the confirmation of the

order passed by the Registrar in Revision

Application also deserves to be quashed and

set aside.

     7.10)          It          was         submitted           that              the

     application           filed       by     the    petitioner              under

     section        71     of    the     Act      was     absolutely             not

     required            and therefore it may be declared

     that         for     expansion          of     business          and         for

     construction           of        chilling       plant        and        other

     construction so as to achieve the                            object and

purpose of the bye-laws, no permission under

section 71 of the Act read with Rule 29 of

C/SCA/3762/2022 CAV JUDGMENT DATED: 30/09/2022

the Rules is required by the petitioner

society.

7.11) Learned Senior Advocate Mr. Jani

submitted that the petitioner has invested

large amount in the projects after taking

necessary permissions to extend support and

give benefit to its members from all the

authorities and the petitioner is one of the

most profit making society in the State of

Gujarat and therefore, permission as prayed

for ought to have beeen granted.

7.12) Learned Senior Advocate Mr. Prakash

Jani further submitted that under the bye-

laws of the petitioner society, the objects

of the Society are prescribed. Bye-law

No.5(1.5) authorises the petitioner to

purchase the land and plant and machinery for

achieving the objects of the petitioner

society. It was submitted that the bye-laws

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are approved by the Registrar and therefore,

so far as the provisions of the bye-laws are

concerned, the same would have the legal

force to the petitioners as also to the

Registrar.

7.13) It was submitted that as per the

bye-laws, the functions of the petitioner

society being in relation to the milk and

milk products, the purchase of the land is

part of the object of the bye-laws of the

society and is in relation to day to day

activities. It was therefore, submitted that

for carrying out the activities which are

referred to in bye-laws of the society, no

permission of the Registrar would be required

under section 71 of the Act in relation to

investment of the funds of the society.

7.14) Learned Senior Advocate Mr. Jani

submitted that when a society intends to

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invest funds in any land or building, then

the permission of the Registrar may be

required but if the land or building is

required for the purpose of achieving the

objects of the society, no such permission is

required under section 71 of the Act as the

Section 71(1)(ff) of the Act which is

applicable in the facts of the case, is in

context of investment of funds of the society

into land or building. It was submitted that

Rule 29 of the Rules in relation to

investment of funds is to be interpreted in

harmony with section 71(1)(ff) of the Act. It

was further submitted that under section

71(1)(ff) of the Act, it has not been

provided that land or building is to be

advantageous to the society in the conduct of

its business and provisions contained in Rule

29(1)(c) of the Rules travels beyond the

scope and the express language of section

71(1)(ff) of the Act.

C/SCA/3762/2022 CAV JUDGMENT DATED: 30/09/2022

7.15) Learned Senior Advocate Mr. Jani

further submitted that earlier the petitioner

society had submitted proposal on 5.12.2005

for establishing its plant at another place

i.e. at Village Shihor, Tal Shihor, District

Bhavnagar and Joint Registrar (Commerce) had

granted permission vide order dated

25.4.2006.

7.16) It was submitted that the State

Government in exercise of powers conferred by

Sub-section (3) of section 3 of the Act has

delegated the powers to the officers for

implementation of the certain provisions of

the Act. It was submitted that at Serial No.3

of the said notification, Joint Registrar in

head office is granted all the powers of

Registrar under the Act and the Rules framed

thereunder, except the powers under sections

71(1)(e) and 71(1)(f) of the Act.

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7.17) Learned Senior Advocate Mr. Jani

submitted that the investment of funds in

relation to land or building comes within

section 71(1)(ff) of the Act and the powers

under section 71(1)(e) and 71(1)(f) are with

the Registrar Cooperative Society, however,

the the powers for the rest of the

permissions under section 71 of the Act are

with the Joint Registrar in head office who

is the Joint Registrar (Commerce). Therefore,

it is the Joint Registrar (Commerce) has the

powers to grant the permission under section

71(1)(ff) of the Act. It was submitted that

it was for this reason that earlier Joint

Registrar (Commerce) has granted the

permission to the proposal of the petitioner

with respect to plant at Shihor.

7.18) Learned Senior Advocate Mr. Jani,

therefore, submitted that the Registrar

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Cooperative Societies does not have the power

to pass order if the case falls under section

71(1)(ff) of the Act and therefore the order

dated 7.8.2020 passed by the Registrar

Cooperative Society is bad in law.

7.19) Learned Senior Advocate Mr. Jani

submitted that the Registrar, Cooperative

Societies issued circular on 14.10.1999

stating that for expansion of business of the

cooperative milk marketing society, there is

no need to ask for the permission under

section 71 of the Act read with Rule 29 of

the Rules with the office of the Registrar

and therefore, considering the circular dated

14.10.1999 read with object and purpose of

the bye-laws registered by the Registrar

himself of the petitioner society, there was

no need for the petitioner society to ask for

the permission under section 71 of the Act

read with Rule 29 of the Rules.

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8. On the other hand, learned Assistant

Government Pleader Mr.Dhawan Jayswal for the

respondent State submitted that there is a

sheer negligence on part of the petitioner as

no application was filed under section 71 of

the Act read with Rule 29 of the Rules which

provides for investment of funds by the

Cooperative Society. It was submitted that

section 71(1)(ff) of the Act and the Rule

29(1)(c) of the Rules are applicable in the

facts of the case and as the petitioner has

failed to take the approval prior to the

investment made by it, the same is rightly

not approved by the Registrar as section 71

of the Act read with the Rules clearly

provide for previous sanction of the

Registrar in the matter of investment of

funds under the Act and the Registrar has

administrative power whether to decide or

reject the sanction as sought by the society

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under the provisions of the Act and the Rules

made thereunder.

8.1) It was submitted that merely because

respondent Joint Registrar has made

inquiries, it would not itself render the

impugned order as nullity on the ground of

order being passed by the Registrar with the

assistance of Assistant Registrar or Joint

Registrar. It was submitted that upon

submission of the proposal made by the

concerned District Registrar after scrutiny

on 3.08.2019, certain queries were raised by

the Joint Registrar (Commerce) on behalf of

the Registrar and communicated to the

concerned District Registrar. It was

therefore, submitted that the contention

raised on behalf of the petitioners is not

tenable with regard to the authority of the

respondent Registrar to pass the impugned

order. In support of such submission,

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reliance is placed on the following averments

made in the affidavit in reply filed on

behalf of respondent no.2- Joint Registrar

(Commerce):

"11. I further say and submit that as per the hierarchy of Registrar and his subordinate officers, as provided under sub-rule 2 of the Section 3, to assist the Registrar, such application is to be submitted through proper channel of submission, and accordingly upon submission of the proposal made by the concerned District Registrar, after scrutiny, on 03.08.2019 certain queries were raised by the Jt. Registrar (Commerce), Cooperative Societies, Gujarat State on behalf of the Registrar, Cooperative had communicated to the concerned District Registrar to call for certain details as per the queries raised from the petitioner - society. The copy of the communication dated 03.08.2019 is annexed herewith and marked as Annexure-R1 to this affidavit in reply.

12. On 26.08.2019 the petitioner -

society had responded with the query raised vide communication dated 03.08.2019 and after comparing the documents on record, more particularly the queries raised vide communication dated 03.08.2019 and response of the petitioner -society dated 26.08.2019, the District Registrar, Cooperative

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Society, Bhavnagar had given detail opinion on 09.09.2019 by opining not the grant approval on the proposal sought under section 71 of the Act. Copies of the communication dated 26.08.2019 of the petitioner - Society and opinion dated 09.09.2019 are annexed herewith and marked as Annexure-R2 Collectively to this affidavit in reply.

13. I say and submit that as per the administrative procedure, the Registrar Cooperative Societies, State of Gujarat is the authority to take decision on such proposal for sought under Section 71 of the Act read with Rule 29 of the Rules, on 27.09.2019 on behalf of the Registrar, Cooperative Societies, Gujarat State, the Jt. Registrar (Commerce). Cooperative Societies, Gujarat State had conveyed the concerned District Registrar and the Chairman/M.D. of the petitioner - society to remain present on 11.10.2019 with the necessary documentary evidence in relation with the proposal sought u/s. 71 of the Act and to provide opportunity of hearing. The Letter dated 27.09.2019 is placed at page no. 79 with the memo of the petition. 119

14. I say and submit that effective hearing was given on 11.10.2019, wherein it the petitioner - society was failed to produced necessary clarification with regards to the lands in question. The details of N.A. and even the lands were not mutated in the name of the petitioner - society in the 7/12 abstract. The expenses were much higher than the estimated expense and according

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on file the decision was taken to return the proposal. I crave leave to tender the original file for kind perusal of this Hon'ble Court at the time of hearing of the present matter.

15. I further say and submit that pursuant to the hearing on 11.10.2019, on 20.11.2019 one more chance was given to the petitioner society to submit the proposal resolving the queries the said communication is place at page no. 80 with the memo of the petition and in response the petitioner - society had submitted the communication on 31.01.2020 placed at page no. 81 with the memo of the petition."

8.2) It was submitted that after

considering all the relevant documentary

evidence on record, the Registrar has passed

the impugned order rejecting the application

under section 71 of the Act after finding

prima facie discrepancy in the record

produced by the petitioner society and he

said order is confirmed by the revisional

authority under section 155 of the Act. It

was therefore, submitted that in view of

concurrent findings, no interference may be

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made while exercising the extra ordinary

jurisdiction under Article 227 of the

Constitution of India.

8.3) It was submitted that letter dated

14.10.1999 referred to and relied upon by the

petitioner society at page no. 108 of the

petition is not relevant as the same is for

approval of expansion of pouch packing and

storage facilities not related to purchase of

land and building and construction of the

building as expansion and extension in the

same area and hence, prior sanction of

Registrar is required for the purchase of

land and expansion and construction. It was

therefore submitted that in the facts of the

case, the application seeking sanction from

the Registrar as required under section 71 of

the Act is rightly rejected by the Registrar

and confirmed by the revisional authority.

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9. Having heard the learned advocates for the

respective parties and having considered the

material on record, it appears that the

impugned order is passed by the Registrar

without giving any opportunity of hearing to

the petitioner and therefore, there is a

clear breach of principles of natural

justice.

10. Apart from the breach of principles of

natural justice, the petitioner has raised an

issue with regard to the applicability of

section 71 of the Act. Section 71 of the Act

reads as under :

"71. Investment of funds:- (1) A society may invest, or deposits its fund,--

(a) in a Central Bank, or the State Co-

operative Bank,

(b) in the State Bank of India,

(d) in any of the securities specified in section 20 of the Indian Trusts Act, 1882,

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(e) in shares or security, or debentures, issued by any other society with limited liability or

(f) in a Scheduled co-operative bank as defined in clause (2) of section 2 of the Reserve Bank of India Act, 1934 and having its registered office within the State or in any nationalised bank,

(ff) in any land or building-

(i) where the money in a building fund established by a society is sufficient for the purpose, or

(ii) where the money in such a fund is insufficient for the purpose or where a society has not established such fund, with the previous sanction of the Registrar:

Provided that the Registrar shall endeavor to decide the question as to previous sanction be given or not, within ninety days of the receipt of an application for such sanction,

(g) in any corporation owned or controlled by the Government of Gujarat and other Scheduled Banks not covered under clause

(f), with the prior approval of the State Government subject to such terms and conditions as may be prescribed in this behalf:

Provided that in the case of the State Co- operative Bank, the Central Co-operative Banks and the Primary Agricultural Credit Co-operative Societies, the Reserve Bank of India may issue further guidelines restricting or enlarging the scope of investment in any institutions approved for the purpose under this section.

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(2) Notwithstanding anything in sub-section (1) the Registrar may, with the approval of this State Co-operative Central Council, order a society or a class or societies to invest any funds in a particular manner, or may impose conditions regarding the made of investment of such funds."

11. On perusal of the above provision, it is

clear that clause (ff) of sub-section(1) of

Section 71 provides for investment of funds

in any land or building where the money in a

building fund established by a society is

sufficient for the purpose or where the money

in such a fund is insufficient for the

purpose or where a society has not

established such fund, with the previous

sanction of the Registrar.

12. It is therefore, necessary to obtain

previous sanction of the Registrar if the