Oral Order:
Challenge in this petition is made to the issuance of a show cause notice dated 2nd/3rd March 2015 issued by the respondent no. 2 herein under section 107 of the Gujarat Cooperative Societies Act, 1961 [the Act for short].
Brief facts are as follows :
The petitioner-Society had challenged, in the earlier proceedings under section 107 of the Act initiated against the Society by the respondent no.2 where final order also came to be passed under section 107 of the Act and against which Special Civil Application No. 8309 of 2014 was preferred. It is the case of the petitioner-Society that the private individuals who own land, admeasuring more than 100 acres at village Sankarda, had formed a cooperative society for the purpose of cultivation of such land and to ensure that the same does not lie fellow, a society had been formed by engaging employees. It is the say of the petitioner-Society that not a single rupee of the Government had been involved either in formation or running of the society and that the Society has not received any land for cultivation from the Government. It is also alleged by the petitioner that in the earlier petition, an unnecessary interest was shown by the respondent no. 2 by remaining present and all possible attempts were made that the purpose of the petitioner does not get redressed from this Court under the guise of availability of alternative remedy, although the stay was operating in its favour since 21st August 2005. The Court, after considering the rival contentions raised by either side, permitted the show cause notice and the orders which were under challenge to be withdrawn. While so doing it, the following directions were also issued in the Order dated 19th February 2015 passed in SCA No. 8309 of 2014.
They are -
[8] In view of the above, following order is passed :-
(a) The show cause notice and the impugned orders shall stand withdrawn. It will be however, open to the District Registrar to take fresh proceeding of winding up of the petitioner society on the basis of report of the auditor, copy whereof is placed on record with the affidavit in reply dated 22.12.2014 filed by the liquidator, if so required under section 107 of the Cooperative Societies Act.
(b) As and when such proceedings are taken by the District Registrar, it will be open to the petitioners to raise all the contentions available under the law to defend against the action taken by the District Registrar.
(c) The petitioners as also all the committee members shall supply their addresses for the purpose of communication to them by the office of District Registrar within a period of ten days from today and such addresses shall be taken as final address for the purpose of communication unless they notify any change in their addresses to the District Registrar.
(d) The appeal preferred by respondent no. 4 shall stand withdrawn as stated by learned advocate Ms. Narsinghani appearing for respondent no. 4.
(e) It is clarified that this Court has not gone into merits of the case.
It is the case of the petitioner that issuance of impugned show cause notice dated 2nd/3rd March 2015 is the result of non-application of mind on the part of the respondent no. 2 and in fact, there is no justification in issuing show cause notice contemplating passing of the order under section 107 of the Act. It is further contended that the respondent no. 2 being biased, the petitioner is not going to get any redressal in a just manner. It is also the say of the petitioner that the action on the part of the respondent no. 2 since affect seriously the vital rights of the petitioner, this Court needs to intervene for the protection of private individuals and for the protection of their land. Reliance is placed on the following decisions :
[a] Apexa Cooperative Bank Limited vs. District Registrar and Ors.,1993 (2) GLH 861;
[b] Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and Ors., 1988 (8) SCC It is urged fervently by the learned counsel Mr. Patel that when the notice itself is reflective of bias on the part of the respondent no. 2, this Court may not permit the same to be sustained and instead entertain the present petition and grant relief, as sought for by the petitioner. He also has further urged that the petitioner may not be relegated to the alternative remedy as this being the fittest case for this Court to exercise writ jurisdiction. It is vehemently urged that writ jurisdiction is a must to do the complete justice.
Learned Assistant Government Pleader Mr. Ashar has submitted that this petition is preferred against the show cause notice. The Court in earlier around of litigation while issuing directions has permitted the petitioner herein to raise all contentions available with it, and therefore, this Court need not at this stage admit, analyze and interpret the details of the show cause notice for the purpose of adjudication of the present petition.
On thus hearing both the sides and considering the material on record, admittedly as can be noticed, challenge is made to the show cause notice issued pursuant to the directions issued by this Court in the earlier round of litigation, where also, the petitioner had challenged the show cause notice under the order of liquidation. The respondents had withdrawn the show cause notice as well as the interim and final orders passed subsequent to issuance of such notice. The Court while permitting such withdrawal had, however, kept it open for the District Registrar to take fresh proceeding of winding up of the society on the basis of report of the auditor, a copy of which was placed on record with the affidavit-in reply dated 22nd December 2014 filed by the liquidator; if so required under section 107 of the Gujarat Cooperative Societies Act.
With, of course, further direction that as and when such proceedings are taken by the District Registrar, the petitioner shall be at liberty to raise all the contentions available under the law to defend against the action taken by the District Registrar. There was a further direction with respect to Society providing addresses of the petitioner-Society and its committee members for the effective communication.
In the aforementioned facts-situation, it would be apt to deal with the authorities in case of Apexa Cooperative Bank Limited v. District Registrar [Supra] which is sought to be relied upon by the learned counsel Mr. Patel where essentially thrust is on due application of mind even when conditions exist for invocation of interim order of winding up. the following paragraphs
45. It is significant to bear in mind that mere existence of any one or more of the conditions laid down in clauses (a), (b) and (c) is not by itself sufficient to warrant the making of an interim order of winding up, for the law requires the competent authority to form an opinion that the society ought to be wound up, having regard to the facts and circumstances of the case. The opinion must be formed reasonably and bona fide, on the proof of the existence of the objective circumstances, one or more, set out in the three clauses which are conditions precedent for the formation of the opinion. If the opinion is formed without application of mind, or on the existence of circumstances on the basis of which no rational human being could have formed the opinion, or it rests on grounds which are extraneous and not germane, or is arrived at mala fide, the opinion could not be said to have been formed as required by the statute and it would be open to judicial scrutiny even in a collateral proceeding such as a writ petition, apart from the departmental hierarchical forum. (see : Barium Chemicals Limited v. Company Law Board, AIR 1967 SC 295 and Rohtas Industries Limited v. S.D Agarwal, AIR 1959 SC 707). But these are not the only cases in which the opinion becomes vulnerable. If, in the formation of the opinion in perfect good faith, the competent authority has misconstrued the provisions giving it power to act or refused to take into consideration something which it was required to take into consideration, then also the opinion would be vitiated and the consequential order would be ultra vires. (See : Anisminic Limited V. Foreign Compensation Commission, (1969) 1 All.E.R. 208 and Union of India v. Tarachand Gupta and Brothers, AIR 1971 SC 1558). It would thus appear that the competent authority would have to form the requisite opinion without committing any of these errors and then an order, which is based upon an opinion which is vitiated by any of such errors, would be clearly in exercise of jurisdiction.
46. The necessary implication of the aforesaid limitation is that the competent authority will have to make a speaking order setting out the grounds for the exercise of power and the reasons which has led him to form the requisite opinion. It is only when an order is accordingly made that it would be possible to ascertain whether the power has been exercised within the terms of the statute or whether it is ultra vires as being vitiated by any of the error indicated above. Whether the authority, which has to ascertain this fact, when the order is challenged is the departmental authority or an outside authority such as this Court exercising the writ jurisdiction, it would not be possible for such authority to arrive at a just conclusion in the absence of a reasoned order, nor would it be possible for the aggrieved society to challenge such order in the appropriate forum on the ground of it having been vitiated by any of the aforementioned errors, unless the material grounds which went into the formation of the opinion are disclosed by a reasoned order. Besides, insistence upon reasoned order itself would be an effective safeguard against arbitrary exercise of powers and even from that point of view, the requirement of making a reasoned order must necessarily be applied. It is also relevant to bear in mind that the competent authority has to form the requisite opinion and make an interim order provided the prescribed conditions exist and that the action of the competent authority is bound to prejudicially affect the society and is likely to entail serious consequences for the society and its office bearers. It cannot possibly be disputed, therefore, that the function of the competent authority in making an interim order is a quasi judicial act. Law is now well settled that when an authority makes an order in exercise of quasi judicial function, it must record its reasons in support of the order it makes. Every quasi judicial order must be supported by reasons.
This is the minimal requirement of the law (see : Mahindra and Mahindra v. Union of India, AIR 1979 SC 798). Having regard to all these considerations, it is apparent that an interim order made by the competent authority must contain reasons in support of such order.
47. As indicated above, in cases covered by clause (a) the competent authority will have to take into account the existence of various statutory alternatives before he forms an opinion that the society ought to be wound up. For example, in cases where defects or irregularities are disclosed in the working of a society in the report of an auditor appointed under Section 84, he will have to consider whether the circumstances demand and the occasion requires to wind up a society even without giving to such society an opportunity to rectify the defects and remedy the irregularities under section 85. Similarly, if any defect is disclosed in the construction, working or financial conditions or the books of a society pursuant to an inquiry held under Section 86 or an inspection made under Section 87, before forming the requisite opinion under section 107 (1), the competent authority will have to take into account the alternative course provided by Section 92 to consider whether winding up must be ordered by an interim order, having regard to the special facts and circumstances of the case, without recourse to such course. As earlier pointed out, winding up is the process whereby the life of the society is ended and such a step would ordinarily be taken only if the alternatives provided by the various other provisions of the statute are found to be inadequate to infuse healthy life in an erring or defaulting society.
This Court while considering the issue of passing of an interim order of winding up of a Cooperative Society emphasized the requirement of affording an opportunity of hearing to the society. The Court noticed that mere existence of any one or more of the conditions laid down in clauses (a), (b) and (c) is not by itself sufficient to warrant making of an interim order of winding up, but, the authority is expected to form an opinion having regard to the facts and circumstances of the case and if any opinion is formed without application of mind, or on the existence of circumstances on the basis of which, no rational human being could have formed the opinion, or it rests on the grounds which are extraneous and not germane, or is arrived at mala fide, the said opinion could not be said to have been formed as required by the statute and it would be open to judicial scrutiny, even in a collateral proceeding such as writ petition, apart from the departmental hierarchical forum. While so doing, the Court has also relied upon some of the well known decisions of the Apex Court.
It is a well laid down ratio but, it is not desirable to enter into the merit of the issue at this juncture. Parties were litigating and this Court, while disposing of earlier petition on given set of facts permitted initiation of proceedings, of course, if permitted by the statute. As the challenge in this petition is to the issuance of show cause notice, it would be apt to remember the decisions of the Apex Court in this regard.
The Apex Court in case of CCT, Orissa and Ors. vs. Indian Explosives Limited, reported in (2008) 3 SCC 688 was considering the judgment of Division Bench of the High Court entertained against the show cause notice issued under the Orissa Sales Tax Act despite plea of availability of alternate remedy. The apex Court held that the High Court completely lost sight of the parameters highlighted by it in number of cases relating to exhaustion of alternative remedy. In the words of the Bench -
8. The High Court seems to have completely lost sight of the parameters highlighted by this Court in a large number of cases relating to exhaustion of alternative remedy. Additionally, the High Court did not even refer to the judgment of another Division Bench for Assessment Year 1997-1998 and Assessment Year 1998-99 in respect of ICI India Limited. In any event, the High Court ought to have referred to the ratio of the decision in the said case. That judicial discipline has not been adhered to. Looked at from any angle, the High Court's judgment is indefensible and is set-aside.
The Apex Court in case of Commissioner of Income Tax, Gujarat vs. Vijaybhai N. Chandrani, reported in (2013) 14 SCC 661 was considering the judgment and order passed by this Court setting aside the show cause notice issued under section 153-C of the Income-tax Act, 1961 and the apex Court held that it is a settled law that when an alternate remedy is available to aggrieved party, it must exhaust same before approaching writ court. The High Court ought not to have entertained the writ petition and instead should have directed the assessee to file reply to said notices and upon receipt of a decision from the authority, and if further aggrieved, could approach the appellate forum provided under the Act. In the words of the Supreme Court -
14. In our considered view, at the said stage of issuance of the notices under Section 153C, the assessee could have addressed his grievances and explained his stand to the Assessing Authority by filing an appropriate reply to the said notices instead of filing the Writ Petition impugning the said notices. It is settled law that when an alternate remedy is available to the aggrieved party, it must exhaust the same before approaching the Writ Court. In Bellary Steels and Alloys Ltd. v. CCT, (2009) 17 SCC 547, this Court had allowed the assessee therein to withdraw the original Writ Petition filed before the High Court as the said proceedings came to be filed against the show-cause notice and observed that the High Court should not have interfered in the matter as the Writ Petition was filed without even reply to the show cause notice. This Court further observed as follows:
3. In the circumstances, we could have dismissed these civil appeals only on the ground of failure to exhaust statutory remedy, but for the fact that huge investments involving the large number of industries is in issue.
15. We are fortified by the decision of this Court in Indo Asahi Glass Co. Ltd. v. ITO, (2002) 10 SCC 444, wherein the assessee had approached this Court against the judgment and order of the High Court which had dismissed the Writ Petition filed by the assessee wherein challenge was made to the show cause notice issued by the Assessing Authority on the ground that alternative remedy was available to the assessee. This Court concurred with the findings and conclusions reached by the High Court and dismissed the said appeal with the following observations:
5. This and the other facts cannot be taken up for consideration by this Court for the first time. In our opinion, the High Court was right in coming to the conclusion that it is appropriate for the appellants to file a reply to the show-cause notice and take whatever defence is open to them.
16. In the present case, the assessee has invoked the Writ jurisdiction of the High Court at the first instance without first exhausting the alternate remedies provided under the Act. In our considered opinion, at the said stage of proceedings, the High Court ought not have entertained the Writ Petition and instead should have directed the assessee to file reply to the said notices and upon receipt of a decision from the Assessing Authority, if for any reason it is aggrieved by the said decision, to question the same before the forum provided under the Act.
17. In view of the above, without expressing any opinion on the correctness or otherwise of the construction that is placed by the High Court on Section 153C, we set aside the impugned judgment and order. Further, we grant time to the assessee, if it so desires, to file reply/objections, if any, as contemplated in the said notices within 15 days' time from today. If such reply/objections is/are filed within time granted by this Court, the Assessing Authority shall first consider the said reply/objections and thereafter direct the assessee to file the return for the assessment years in question. We make it clear that while framing the assessment order, the Assessing Authority will not be influenced by any observations made by the High Court while disposing of the Writ Petition. If, for any reason, the assessment order goes against the assessee, he/it shall avail and exhaust the remedies available to him/it under the Act, 1961.
It hardly needs to be emphasized that exercise of writ jurisdiction in the circumstances which have been specified in the said judgment and even otherwise for meeting the ends of justice, in all appropriate cases is always available with the Court. Formation of opinion to initiate proceedings when is in good faith and by a speaking reasoned order, and when aggrieved party has an appropriate platform and forum available, these are sufficient safeguards available against arbitrary exercise of power. In the present case, again, considering the aforementioned background, there has been issuance of a show cause notice under section 107 of the Act, pursuant to the order in earlier round of litigation, some of the references which have been made in the notice may not be the reasons for this Court to jump to any conclusion, at this stage, without relegating the petitioner to alternative remedy.
This Court needs to remind itself of the fact that in the earlier round of litigation, while permitting the District Registrar to take recourse to the provisions of Section 107 of the Act, of course on due application of mind and when such proceedings were instituted, the Court had expected the petitioner herein to raise all contentions in the event of such proceedings being initiated by the District Registrar available under the law. The petitioner's insistence on intervention of this Court at this stage, without making any attempt to reply to such show cause notice, only on the ground of possible apprehension of authority having prejudged the issue is found unacceptable.
Under the circumstances, petition merits no acceptance and deserves to be dismissed. The petitioner, however, shall be at liberty to approach the second respondent herein and seek reasonable time for the purpose of replying to the show cause notice. If any such request is received by the respondent no. 2, it shall grant such time and on receipt of the reply to the show cause notice, the respondent no. 2 shall decide the same, keeping in mind the spirit of the order passed by this Court in the earlier round of litigation strictly in accordance with law.
While parting, it is needs a mention that this Court has chosen not to go into the merits of the case and that none of the observations made hereinabove shall prejudice either side.
Writ petition is dismissed with no order as to costs.