The Gandhinagar Nagrik Co. Op. ... vs District Registrar, ...
2023 Latest Caselaw 1917 Guj

      C/SCA/2006/2023                                 JUDGMENT DATED: 27/02/2023




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                R/SPECIAL CIVIL APPLICATION NO. 2006 of 2023

FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE A.S. SUPEHIA                                      Sd/-
================================================================
1      Whether Reporters of Local Papers may be allowed
       to see the judgment ?                                               NO

2      To be referred to the Reporter or not ?                            YES

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

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

================================================================
             THE GANDHINAGAR NAGRIK CO. OP. BANK LTD.
                              Versus
     DISTRICT REGISTRAR, CO-OPERATIVE SOCIETIES, GANDHINAGAR
================================================================
Appearance:
MR BS PATEL, SENIOR ADVOCATE WITH MR CHIRAG B PATEL(3679) for
the Petitioner(s) No. 1,2
MR ROHAN SHAH, AGP for the Respondent(s) No. 1
MR KIRTAN H MISTRY(10012) for the Respondent(s) No. 2,3,4
MR VC VAGHELA, for the Respondent No.4
MR CB UPADHYAYA, for the Respondent Nos.2,3
================================================================
     CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
                       Date : 27/02/2023
                      ORAL JUDGMENT

Draft amendment is allowed in terms of draft. The same shall be carried out forthwith.

1. Rule. Learned advocates appearing for the respective respondents waive service of notice of rule.

2. Since a short issue is involved, the writ petition is taken up for final hearing today.

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

3. By way of the present writ petition, the petitioners-Cooperative Bank has assailed the communication dated 01.02.2023 issued to them calling upon to supply some details within a period of one day as mentioned therein. Instead of providing the details to the District Registrar, Co-operative Societies, Gandhinagar, the petitioners- Cooperative Bank has filed the writ petition challenging the communication terming the same as "show cause notice."

4. Learned Senior Advocate Mr.B.S.Patel, while placing reliance on the provisions of Section 74D of the Gujarat Co-operative Societies Act, 1961 (for short "the Societies Act"), has submitted that issuance of the show cause notice is without jurisdiction since the Ahmedabad Board of Nominees in Lavad Case No.16 of 2023 filed by respondent nos.2 and 3 has passed an interim order dated 30.01.2023 restricting for holding the election proceedings and the aforesaid suit is still pending and the interim order has been further extended. While placing reliance on the judgment of the Division Bench of this Court in the case of Amreli District Co- operative Sales and Purchase Union Limited vs. State of Gujarat, 1984 (2) G.L.R. 1244, he has submitted that the Registrar cannot exercise the power, where the election of the Managing Committee or functioning thereof after election is restrained under the orders of the Court. Thus, it is submitted that since the Board of Nominees has already passed an interim order restricting of holding of election, the Registrar does not have any power of appointing the custodian under the provisions of Section 74D of the Societies Act.

5. Learned Senior Advocate Mr.Patel has submitted that the election was scheduled to be held on 12.02.2023 and accordingly, a notification

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

was also issued on 25.01.2023, which has been assailed by the private respondent nos.2 and 3 before the Board of Nominees in the aforesaid suit and hence, since in view of the proceedings filed by respondent nos.2 and 3, the show cause notice is required to be quashed and set aside as the same is de hors the provisions of Section 74D of the Societies Act.

6. While placing reliance on the Notification dated 29.09.2020 issued by the Ministry of Law and Justice, Central Government, by which an amendment is introduced under the Banking Regulation Act, 1949 (for short "the B.R.Act, 1949"), more particularly Section 36AAA thereof, it is submitted by learned Senior Advocate Mr.Patel that it could be only the Reserve Bank of India, in consultation with the State Government, which can pass orders with regard to the change of management concerning the Co-operative Bank and not the Registrar. He has placed reliance on the provisions of Section 56 of the B.R.Act, 1949 and also the provisions of Section 33AA, which pertains to the control over the management under the B.R.Act, 1949. Thus, it is submitted that the Reserve Bank of India is the only authority, which can exercise the powers and not the Registrar and hence, the impugned show cause notice may be quashed and set aside.

7. In response to the aforesaid submissions, learned advocate Mr.Vaghela appearing for the respondent no.4 has submitted that the writ petition itself is not maintainable. He has submitted that the judgment of the Division Bench, on which reliance is placed by the petitioners, will not apply in the present case since in the present case the term of elected committee has already expired on 12.07.2020 and since no elections were held, the private respondents had approached the Board of Nominees by

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

filing the suit for challenging the notification of the election as well as holding of election. It is submitted that pursuant to the aforesaid suit, which was filed by an interim order dated 30.01.2023, the Board of Nominees had granted interim stay against holding of election. It is, thus, submitted that the provisions of Section 74D of the Societies Act would squarely applied in the present case and accordingly, a communication has been issued to the petitioners calling upon them to provide the information as mentioned therein. It is thus, submitted that the writ petition itself is premature. He has submitted that if at all the petitioners are aggrieved by any orders passed by the Registrar, they have a remedy of filing appropriate application under Section 155 of the Societies Act before the State Government. Thus, it is urged that the writ petition may be rejected.

8. Adopting the aforesaid arguments, learned advocate Mr.Upadhyaya appearing for the respondent nos.2 and 3 has submitted that the writ petition may not be entertained. While supplementing the submissions advanced by learned advocate Mr.Vaghela, it is submitted by him that the provisions of Section 36AAA of the B.R.Act, 1949, which has been introduced vide Notification dated 29.09.2020, the same has to be read in juxta position with the provisions of Section 81 of the Societies Act. It is, thus, submitted that after the entire procedure is undertaken in case the Committee is superseded and a Committee or the administrator is appointed then the Reserve Bank of India is required to be consulted and not at the stage of issuance of show cause notice under Section 74D of the Societies Act. It is thus, submitted that the petition is premature and the same may be dismissed.

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

9. Learned AGP Mr.Rohan Shah appearing for the State authority has submitted that the petitioners have an alternative remedy under the provisions of Section 155 of the Societies Act in case any orders are passed against them. It is submitted that at this stage, the Registrar has only called upon the petitioners to provide some details and in case they are aggrieved by the final orders, they can always approach the State Government. Thus, it is reiterated that the writ petition may not be entertained.

CONCLUSION:

10. As noticed hereinabove, the petitioners have approached this Court by challenging the communication dated 01.02.2023 issued by the District Registrar, Co-operative Societies, Gandhinagar calling upon them to give the necessary details as mentioned therein. The District Registrar has called for - (1) the petitioner to submit the details about the last election held by them; (2) the appointment of the members of the committee and the proof of such appointment; (3) the approval of the sub- rules of the petitioners' Cooperative Bank and finally; and (4) to give yearly assessment of the year 2014-2015 till the year 2021-2022. Only upon such information being demanded by the District Registrar, the petitioners have rushed before this Court by filing this writ petition. The District Registrar has not yet opined anything with regard to appointment of custodian as envisaged under Section 74D of the Societies Act. The District Registrar has not yet made-up his mind and it will only depend upon the information, which is supplied by the petitioners pursuant to the aforesaid communication. Instead of supplying the necessary information as demanded, this writ petition is filed before this Court. The petitioners

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

were expected to supply the details to the District Registrar and the said communication is construed by the petitioners as if the orders are passed under Section 74D of the Societies Act by the Registrar. The provisions of Section 74D of the the Societies Act reads as under:-

"SECTION 74D Appointment of Custodian in certain circumstances

(1) Where in respect of any society including a society existing immediately before the commencement of the Gujarat Co-operative Societies (Amendment) Act, 2015 (Guj. 12 of 2015), a new committee of management is, for any reason whatsoever, not elected before the expiry of the term of office of members of a committee of management of such society or having been elected not functioning within a period of three months (not being a committee referred to in Sec. 80-A), except for the reason of order of the competent court due to which such election could not be held or the managing committee could not start functioning, the registrar shall by an order in writing, appoint a person or a committee of persons to be the Custodian of the society for a period of one year or until a new committee of management is elected or, as the case may be, starts functioning.

(2) The Custodian shall arrange to hold election of such society within a period of one year and the Committee shall be constituted before the expiration of that period.

(3) The Custodian so appointed shall, subject to the control of the Registrar and to such instructions as he may from time to time give, have powers to exercise all or any of the functions of the committee and take all such actions as may be required in interest of the society.

(4) All acts done or purported to be done by the Custodian during the period when the affairs of the society are carried on by such Custodian, shall be binding on the new committee of management."

11. The petitioners have sought shelter against the aforesaid provisions, more particularly expression mentioned therein "except for the reason of order of the competent court due to which such election could not be held". A close reading of the provisions of Section 74D of the Societies Act reveals that in the eventualities, which are mentioned therein, the Registrar can pass an order in writing to appoint a person or a

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

Committee of persons to be the custodian of the society for a period of one year or until a new committee of management is elected. Unquestionably, in the present case, the Registrar has not passed any order under section 74D of the Societies Act, hence the writ petition is premature.

12. The entire case of the petitioners hinges on one issue i.e. passing of an interim order dated 30.01.2023 passed by the Board of Nominees in Lavad Case No.16 of 2023, which has been filed by the respondent nos.2 and 3 staying the election. It is asserted by the petitioners that the Registrar cannot proceed under Section 74D of the Societies Act, since by an interim order the election has been stayed. The submissions advanced by the petitioners does not merit acceptance for two reasons - (1) there is no order passed by the Registrar under Section 74D of the Societies Act nor the Registrar has yet made-up his mind to appoint the custodian since the petitioners have not yet supplied any requisite information in this regard; and (2) the expression, as mentioned hereinabove, with regard to "any order passed by the competent court due to which such election could not be held" have to be read in conjunction with the appointment of "new committee" which is not elected before the expiry of term of office of committee or though has been elected, but is unable to function within three months, due to order passed by the competent court. In such eventuality the Registrar is empowered to appoint a person or a Committee as a custodian of the Society for a period of one year. In the present case, it is the specific case of the respondents that the tenure of the Committee of the petitioner No.1-Bank has already expired on 12.07.2020, which has not been denied by the petitioners. Thus, when the interim order staying the election was passed in the Lavad Case on

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

30.01.2023, the tenure of the petitioner's Committee has already ended. Neither the petitioners fall under "new committee" nor they can contend that they are estopped from functioning after they are elected as envisaged under the provision of section 74D of the Societies Act.

13. The petitioners have placed reliance on the judgment of the Division Bench in the case of Amreli District Co-operative Sales and Purchase Union Limited (supra). The relevant observations, with regard to the provision of section 74D of the Societies Act, are as under:

"Sec. 74-D provides for appointment of custodian in certain circumstances. We do not think that we can sustain the challenge to this provision as alleged on behalf of the petitioners. It is said that the Registrar has been invested with the power to appoint Custodian for any reason whatsoever. At the bar, it has been stated on behalf of the petitioners, that in past the Registrar had invoked his power under sec. 74-D even when the functioning of the new committee of management was restrained under the orders of the Civil Court or the High Court. We are afraid that this can be hardly said to be a ground for impugning the provision. We do not think that by this power any fundamental right either as to forming association or to carry on business or trade is negatived or restricted in any way. As a matter of fact, the provision is an enabling provision that when a new committee of management is not elected or having been elected not functioning after the expiry of six months of the term of the office of members of the old committee of management of such society, the Registrar is empowered to appoint a sole Custodian or a committee of persons as custodian of such society. The Registrar cannot exercise the power where the election of the managing committee or functioning thereof after election is restrained under the orders of the Court. It is only when, on account of the voluntary default of society in electing a new committee or on account of a default of newly elected committee to function that the Registrar is entitled to exercise the power. We must therefore, treat this provision as a provision in public interest and we do not think that it can be said to be unreasonable since the custodian is to exercise his powers subject to the control of the Registrar and such instructions as may be given from time to time. This is a stop-gap arrangement until a new management committee is elected or a newly elected committee starts functioning. The challenge to this section is, therefore, rejected and the provision must be upheld as valid and intra vires the Constitution."

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

Before the Division Bench the provision of section 74D of the Societies Act were challenged. The aforenoted observations made in context of the powers being exercised by the Registrar appointing the custodian, though there were orders restraining from the competent Court and the High Court. The Division Bench has clarified that the Registrar cannot invoke the powers under section 74D of the Societies Act when there are restraining orders passed by the Courts restraining the Committee from functioning "after election". The Division bench has clarified, " The Registrar cannot exercise the power where the election of the managing committee or functioning thereof "after election" is restrained under the orders of the Court." Thus, the Division Bench has laid assertion that only such committee, which has been appointed "after election" whose functioning is restrained by the orders passed by the Court. Thus, it would be a "new committee" which has been formed by an election, and whose functioning is restrained, in those cases the Registrar cannot exercise powers under section 74D of the Societies Act.

The case of the petitioners, unquestionably does not fall under such contingency.

14. The petitioners have also placed reliance on the Notification dated 29.09.2020 amending the Banking Regulation Act. By this Notification, an amendment to the provisions of Section 36AAA have been introduced in the B.R. Act, 1949. The same reads as under:-

"(a) in section 36AAA as so inserted:-

(i) for the words "multi-State co-operative bank", wherever they occur, the words "co-operative bank" shall be substituted;

(ii) in sub-Section (1), the following proviso shall be inserted, namely:-

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

"Provided that in the case of a co-operative bank registered with the Registrar of Co-operative Societies of a State, the Reserve Bank shall issue such order in consultation with the concerned State Government seeking its comments, if any, within such period as the Reserve Bank may specify."

15. The relevant extract of provision of section 36AAA of the B.R. Act, 1949 prior to amendment is as under"

"SECTION 36AAA : Supersession of Board of Directors of a multi-State co- operative bank.

(1) Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a multi-State co-operative bank being conducted in a manner detrimental to the interest of the depositors or of the multi-State co-operative bank or for securing the proper management of the multi-State co-operative bank, it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, supersede the Board of Directors of such multi-State co-operative bank for a period not exceeding five years as may be specified in the order, which may be extended from time to time, so, however, that total period shall not exceed five years.

xxxxx"

The reliance placed by the petitioners on the preceding provisions is absolutely ill-conceived. The petitioners, at the stage, of invocation of the proceedings under section 74D of the Societies Act, which pertains to appointment of custodian for temporary period until a new management committee is elected or a newly elected committee starts functioning is comparing the "superceding of the Board of Directors" of the Co- operative Bank, as envisaged under section 36AAA of the B.R.Act, 1949. The exercise of the Reserve Bank under section 36AAA of the B.Ract, 1949 is under public interest so that the affairs of the Multi-State Co- operative Bank can be controlled and the interest of depositors can be secured. If such a contention is accepted as presented by the petitioners, the same would be doing violence to the statute, since the Reserve Bank

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

will be directly involved in the proceedings or passing of the order under section 74D of the Societies Act in appointing a custodian by the Registrar, which can never be the intention of the legislature. Hence, the contention, which is raised in context of the provision of section 36AAA of the B.R.Act, 1949 is absolutely misleading.

16. I may with profit also to incorporate the provisions of Section 155 of the the Societies Act. The same reads as under:-

"155. The State Government and the Registrar may call for and examine the record of any inquiry or the proceedings of any other matter of any officer subordinate to them, except those referred to in sub-section (9) of section 150, for the purpose of satisfying themselves as to the legality or property of any decision or order passed, and as to the regularity of the proceedings of such officer. If in any case, it appears to the State Government, or the Registrar, that any decision or order or proceedings so called for should be modified, annulled or reversed, the State Government or the Registrar, as the case may be, may after giving persons affected thereby an opportunity of being heard pass such order thereon as it or he may deem just."

A simple reading of the provisions of Section 155 of the the Societies Act indicates that the State Government and the Registrar have all the powers to call for examine the record of any proceedings, as mentioned therein to verify the legality or propriety of any decision or order passed thereunder. Thus, the petitioners can approach the State Government in case any order is passed against them under the provision of Section 74D of the the Societies Act.

17. Thus, the writ petition fails. The same is dismissed. Rule is discharged.

C/SCA/2006/2023 JUDGMENT DATED: 27/02/2023

18. At this stage, learned Senior Advocate Mr.Patel requests for extending the interim stay, which is passed by this Court vide order dated 06.02.2023. The request is rejected in view of the aforesaid observations. However, it is clarified that the petitioners are given two weeks time to provide all the details, as mentioned in the impugned communication, after the receipt of the order of this Court.

Sd/-

(A. S. SUPEHIA, J) ABHISHEK/62