1. This petition filed under Article 226 of the Constitution is directed against the order dated 19.8.2014, whereby the petitioners were held to be disqualified for membership of the committee. The consequential order of the same date, Annexure P-1, is also called in question, whereby it was held that the elected Board of Directors has ceased to function for want of quorum. Accordingly, in place of Board of Directors, an Administrator is appointed.
2. The case of the petitioners is that the petitioner-Board was constituted for five years pursuant to an election held on 4.4.2008. The term of the Board was five years, i.e., up to 3.4.2013. Before the Board could complete its tenure, it was suspended on 9.12.2009. This suspension order was challenged before this Court in WP No. 4536/2011. The Division Bench by order dated 30.1.2014 (Annexure P/4) set aside the said suspension order. The said order of this Court was unsuccessfully put to test before the Apex Court in SLP No.10826/2014. The Apex Court dismissed the appeal on 30.6.2014 by observing that it would be open to the petitioners to take appropriate action in accordance with law.
3. The respondents issued notices to petitioners No.4,5,8,9 and 11 on 6.8.2014. These notices were issued under rule 44 (1) (h) of M.P. Co-operative Societies Rules, 1962 (for brevity, the "1962 Rules"). The case of the petitioners is that before issuance of said notices dated 6.8.2014, the action under Section 48-AA of the M.P.Co-operative Societies Act, 1960 (for brevity, the "Act") was already initiated by the society under section 48-AA of the Act. In addition, it is contended by Shri H.D.Gupta, learned senior counsel that the aforesaid notices (Annexure P/6) were not served on the petitioners No.4,5 and 8. The attention is drawn on Annexure P-7 to submit that notices were returned and were not actually served on the said petitioners. It is further contended that President of the Board appeared and submitted objection in respect to the action taken by the Joint Registrar. The specific objection was that once an action has already been initiated by the Board/Society, it is not open to the respondents to issue notices (Annexure P/6). Registrar could have taken action only after completion of two months period as per Section 48-AA.
4. The petitioners argued that the total number of Directors of Board is 23, out of which 15 are elected members, 5 are official members and 3 are nominated members. As per Rule 44 (1) (h) of 1962 Rules, the action can be taken only when there is a deficiency of repayment of loan. Rule 44 (1)(h) does not include non payment of "advance". It is, therefore, urged that the action for non-payment of advance is beyond the ambit of said rules and, therefore, action is without authority of law. Shri Gupta relied on Section 86 of the Act and Rules 75 (3)(c) of 1962 Rules to submit that notices are required to be issued and served in consonance with the said provisions. The notices were not served as per the said statutory procedure and, therefore, the entire action based on such notices is vitiated. It is also submitted that the registered notices were not issued with acknowledgment due. Reliance is also placed on Order 5 Rule 9 CPC to bolster the submission regarding mode of service of notice.
5. It is also urged that Annexure P/9 is the no-dues certificate issued by the concerned society manager in favour of petitioners No.4, 5 and 8. This certificate makes it clear that there were no dues against these petitioners. If notices would have been received, the petitioners could have put forth their defence before the respondents.
6. It is further urged by Shri H.D.Gupta that on the date fixed for appearance, i.e., 19.8.2014, the order Annexure P/2 has been passed. The order is passed by invoking Section 50-A (1) and (2) of the Act and Rule 44(1) of 1962 Rules. The authority has not taken pains to verify whether notices were served. This action runs contrary to the principles of natural justice and requirement of the law. It is submitted that the aforesaid action is totally unknown to law and caused serious prejudice to the petitioners. It is contended that the order dated 19.8.2014 (Annexure P/1) is based on illegal order (Annexure P/2) and, therefore, this order is also required to be set aside. It is submitted that in the facts and circumstances of this case, it is clear that the action of the respondents is arbitrary in nature. They violated principles of natural justice and, therefore, in view of Division Bench judgment of this Court in Writ Appeal No. 1065/2011 (Sanjay Nagaich vs. State of MP), which is upheld by Supreme Court, the petitioners may not be compelled to avail the alternative remedy.
7. Shri H.D.Gupta, learned senior counsel further submits that section 48-AA (i) of the Act makes it clear that any action to disqualify an elected member can be taken only after giving him a reasonable opportunity of being heard. The said provision makes it clear that if the Board failed to take action within two months then only the Registrar may take action relating to disqualification of the membership. In the present case, since the action was already taken by the Board, unless the statutory period of two months was over, it was not open to the Registrar to take action. It is further contended that Section 48-AA was inserted in the statute book subsequent to insertion of Section 50-A, therefore, Section 50-A must be treated as impliedly repealed. Reliance is placed on AIR 1987 SC 1015 (Yogendra Pal Singh vs. Union of India). Lastly, it is submitted that section 28 of General Clauses Act has no application in the present case because admittedly, the respondents have not issued notices by registered post with acknowledgment due. The petitioners have not advanced any argument on the point of malafide. In addition to oral submissions, written synopsis is also filed by the petitioners.
8. The respondents, on the other hand, contended that the petitioners have an alternative statutory remedy and, therefore, this petition be not entertained. Reliance is placed on (2014) 1 SCC 603 (Commissioner of Income Tax vs. Chhabil Dass Agarwal).
9. Shri Raghvendra Dixit, learned counsel for the respondents submits that out of 23 Directors of the Board, 15 were elected members, two of them have died and 6 were declared disqualified. Because of aforesaid disqualification, they ceased to hold their office in view of Section 50-A (2) of the Act. It is urged that as per Rule 43 (6) of 1962 Rules, quorum of the Board of Directors would be more than 50 per cent out of total 15 elected Directors. Since certain Directors were declared as disqualified and ceased to be the members, for want of quorum, administrator was rightly appointed by Annexure P/1. It is submitted that the registered notices were legally served on the petitioners. Reliance is placed on Section 27 of the General Clauses Act. It is contended that full reasonable and effective opportunity of hearing was given to the petitioners. Petitioners S/Shri Mukut Singh and Suresh Kumar did not pay the loan and said amount was outstanding for more than twelve months. For this reason they incurred automatic disqualification and ceased to hold their office. Remaining Directors S/Shri Dillu Ram, Shri Pragilal Dangi, Pooran Singh and Smt. Kamla took advance and did not pay it for more than last twelve months. They suffered disqualification in terms of Section 50-A (2) of the Act. It is contended that there is no illegality in the action of the respondents, which warrants interference by this Court. Reliance is also placed on 1969 JLJ 1016 (Basant Kumar vs. Assistant Registrar, Co-operative Societies, Jabalpur), 2012 (2) MPLJ 237 (Rajiv Kumar Jain vs. Veerendra Narain Mishra (Elected Representative) and others) and (2009) 9 SCC 173 (P.K.Palanisamy vs. N.Arumugham). Lastly, it is contended that as per section 50-A(2) of the Act, principles of natural justice need not be followed. Shri Raghvendra Dixit contended that a plain reading of section 50-A (2) makes it clear that the Legislature has not chosen to include principles of natural justice in the said provision and, therefore, no fault can be found in the action of the respondents. He also urged that although notices were issued by relying on Rule 44 (1)(h) and Section 48-AA, fact remains that the Registrar has power to declare the seat vacant under section 50(2). If source of power is traceable/otherwise available, wrong quoting of provision will not make the order vulnerable. Respondents also filed their written submissions.
10. No other point is pressed by learned counsel for the parties.
11. I have heard the parties at length and perused the record.
12. Section 50-A was inserted in the statute book w.e.f. 13.12.2007 (published in MP Gazette (Extraordinary) dated 13th December, 2007). Section 48-AA was inserted on 4.1.2010 (published in MP Gazette (Extraordinary) dated 4th January, 2010). Sections 48-AA and 50-A of the Act are reproduced as under for ready reference :-
| 48-AA. Disqualification for membership of Board Directors and for representation --No person shall be eligible for election as a member of the Board of Directors of a society and shall cease to hold his office as such, if he suffers from any disqualification specified in this Act or the rules made thereunder and no society shall elect any member as its representative to the Board of Directors of any other society or to represent the society in other society, if he suffers from any disqualifications specified in this Act or the rules made thereunder :Provided that if a member suffers from any of the disqualifications specified in the Act or the rules made thereunder--(i) it shall be lawful for the Board of Directors of the society to disqualify such members where he is elected as a Director, being a member of that society, after giving him a reasonable opportunity of being heard, within two months from the date of coming to the notice of the society from holding the post and if the society fails to take action within two months, the Registrar shall disqualify such member from holding such post, by any order in writing after giving him reasonable opportunity of being heard;(ii) if the member incurs a disqualification in the higher level society, for his actions as a representative, such higher level society shall take action to disqualify him for holding the post in the higher level society and if the society fails to take action within two months, the Registrar shall disqualify such member from holding such posts by an order in writing after giving him reasonable opportunity of being heard. Explanation For the purpose of this section, the expression disqualification shall not include the disqualification specified in Section 50-A for election as a member of the Board of Directors or a representative of a society. (Emphasis Supplied) | 50A. Disqualification for being candidate or voter for election to Board of Director or representative or delegate of Society:-(1) no person shall be qualified to be a candidate for election as member of the Board of Directors, representative or delegate of the society, if he is in default for a period exceeding 12 months to the society or any other society for any loan or advance taken by him.(2) A person elected to an office of a society shall cease to hold such office, if he is in default for a period exceeding 12 months to the society or any other society for any loan or advance taken by him, and the registrar shall declare his seat vacant.Provided that a person elected to an office of a cooperative bank from a society other then co-operative credit structure, shall cease to hold such office, if such society commits default for any loan or advance for a period exceeding three months, and registrar shall declare his seat vacant. |
"The general principle that there is a strong presumption against implied repeal recently came up for consideration before the High Court of Australia in Shergold Vs. Tanner reported in (2002) 76 ALJR 808. In a joint judgment the court (GLEESON, C.J. McHUGH, GUMMOW, KIRBY and Hayane JJ.) quoted with approval the following observations of GAUDRON J. in Saraswati Vs. the Queen reported in (1991) 172 CLR1 " it is a basic rule of construction that in the absence of express words, an earlier statutory provision is not repealed, altered or derogated from by a later provision unless an intention to that effect is necessarily to be implied. There must be very strong grounds to support that implication, for there is a general presumption that the legislature intended that both provisions should operate and that, to the extent that they would otherwise overlap, one should be read as subject to the other." (Emphasis Supplied)
14. If in the light of aforesaid principle, Sections 48-AA and 50-A are examined, it will be clear that Section 50-A only provides that if a person elected to an office of a society is in default of payment of loan or advance for more than twelve months to the society, he shall cease to hold such office. The Registrar is empowered under sub-section (2) of section 50-A to declare his post vacant. However, no methodology is prescribed in section 50-A. In other words, section 50-A is silent regarding the applicability of principle of natural justice. This point need not detain this Court for a longer time. This is settled in law that "Even if a statute is silent and there are no positive words in the Act or the Rules made thereunder, there could be nothing wrong in spelling out the need to hear the parties and interest are likely to be affected by the orders that may be passed, and making it a requirement to follow a fair procedure before taking a decision, unless the statute provides otherwise. The principles of natural justice must be read into unoccupied interstices of the statue, unless there is a clear mandate to the contrary. Where the statute is silent about the observance of the principles of natural justice, such statutory silence is taken to imply compliance with the principles of natural justice where substantial rights of parties are considerably affected. The application of natural justice becomes presumptive, unless found excluded by express words to statute or necessary intendment. Its aim is to secure justice or to prevent miscarriage of justice. Principles of natural justice do not supplant the law, but supplement it." [See, Swadeshi Cotton Mills vs. Union of India (1981) 1 SCC 664]. This view is consistently followed by the Courts. In (1994) 4 SCC 328 (Dr. Umrao Singh Chaudhary vs. State of MP), the Apex Court took the same view. In the light of this legal position, in my opinion, the principles of natural justice are implicit and are required to be read into Section 50-A of the Act. Section 48-AA also deals with the same subject matter, which relates with disqualification of membership of Board of Directors and representatives of the candidates. Undoubtedly, Section 48- AA was inserted later on. Section 48-AA (1) makes it clear that the Legislature intended to provide reasonable opportunity of hearing to the person concerned. This section makes it clear that if a member suffers from any of disqualifications specified in the Act or Rules, it is the duty of the Board of Directors of the society to disqualify such member. However, proviso makes it clear that this can be done after giving him a reasonable opportunity of being heard. If the society fails to take action within two months, the power is vested with the Registrar to disqualify such member by passing an order in writing after giving him reasonable opportunity of being heard. Thus, the principles of natural justice are embodied in Section 48-AA.
15. In view of aforesaid, I am unable to agree with the contention of Shri Raghvendra Dixit that the principles of natural justice are excluded in section 50-A(2) of the Act. In my view, a simple reading of both the provisions in juxtaposition will make it clear that it cannot be said that two cannot stand together. Section 50-A enables the Registrar to declare that seat has fallen vacant. The parameters/ingredient on which such declaration can be based is enumerated in the said provision. The procedure is mentioned in section 48-AA. The principles of natural justice need to be read into section 50-A(2). Thus, both the sections can co-exist and they are required to be harmoniously construed. This is trite that a statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. It is the duty of the courts to avoid "a head on clash" between two sections of the same Act and "whenever it is possible to do so, to construe provisions which appear to conflict so that they harmonise". [AIR 1987 SC 57 (University of Allahabad vs. Amritchand Tripathi) and (1991) 4 SCC 258 (Sultana Begum v. Premchand Jain)]. In view of Saraswati Vs. the Queen (supra) (referred by Justice G.P.Singh and quoted in para 13 above), section 50-A (2) must be read subject to section 48-AA of the Act. Thus, the contention of Shri Gupta that section 50-A is impliedly repealed cannot be accepted. The judgment of Yogendra Pal Singh (supra) has no application in the facts and circumstances of the case.
16. In view of aforesaid analysis, it is clear that the Registrar was required to follow the principles of natural justice before declaring the seat as vacant. The case of the respondents is that the show cause notices were issued to the petitioners which were legally served on them and, therefore, reasonable opportunity has been extended. The petitioners have stated that the action on the part of Registrar is bad because by Annexure P-10 dated 25.7.2014, the society had already initiated the action. The Registrar could have taken action only when society failed to take action within two months. This objection of the society goes to the root of the matter and needs serious consideration. Section 48-AA (i) is inserted by Amendment Act 2009 (No.2 of 2010). In statement of objections and reasons of said Amendment Act, it is mentioned that "(10) Section 48-AA is being amended to empower the Registrar to take action if the cooperative society fails to fulfill its obligations". The obligation flowing from section 48- AA is to take action against such person who suffered any disqualification under the Act and Rules within the stipulated time. Section 48-AA (I), in no uncertain terms makes it clear that "if the society fails to take action within two months", the Registrar shall disqualify such members from holding such post by passing an order in writing. In the present case, the society had already initiated action by issuing notices to the defaulting member. This fact was brought to the notice of the respondents. Petitioners have filed those notices issued by the society, Annexure P-10 dated 25.7.2014. A plain reading of these notices makes it clear that action was initiated under section 48-AA of the Act. One such notice reads as under :-"
"HINDI
17. President of the society brought it to the notice of the respondents that action has already been initiated. It is not the case of the respondents that either such action was actually not initiated or it was not initiated within the stipulated time. In this factual backdrop, it is to be seen whether Registrar was justified in initiating action by issuing show cause notice, Annexure P/6 dated 6.8.2014. In the opinion of this Court, once action has been taken by the society under section 48-AA, it was not open to the Registrar to initiate parallel action. Any other interpretation of this provision will make the words "if the society fails to take action".... as redundant. The Registrar can take action and disqualify a member only when society fails to take action within two months. It is made clear that in cases where the society has not initiated any action within two months, the action on the part of the Registrar is permissible. Thereafter, Registrar need not to wait for the action to be initiated by the society. In other words, if the society fails to take action within two months as prescribed in Section 48-AA (i), the Registrar may take action to disqualify such member. In the present case, the Registrar has erred in initiating parallel action which is against the mandate of section 48-AA (i) of the Act. To sum up, it is suffice to say that section 50-A(2) is an enabling provision which gives power to Registrar to declare the seat vacant if certain conditions are fulfilled. In view of section 48-AA, it is clear that such action can be taken if cooperative society fails to fulfill its obligation. I find support in my view from Aims and Objects of the Amendment Act reproduced herein above. Thus, the action of the Registrar in initiating action by issuance of show cause notice is clearly impermissible. The impugned order, Annexure P-2, based on such proceedings needs to be interfered with. However, I will be failing in my duty if the judgment cited by Shri Raghvendra Dixit on this point is not considered. He placed reliance on the Division Bench judgment in Rajiv Kumar Jain (supra) in which Basant Kumar (supra) was considered. In para 14 of the said judgment, the Division Bench opined that "admittedly, in the present case, the society, from which the respondent No.1 was elected as representative of the co-operative bank and thereafter he was elected as Board of Director, became defaulter". In this factual matrix, this Court upheld the order of the Joint Registrar. Same finding is given by the Division Bench in para 15 of the judgment. In the case of Rajiv Kumar Jain (supra), it was not in dispute that the society became disqualified to send a representative to the bank and, therefore, the respondents ceased to become a representative and member of the Board of Directors. No such admitted facts are available here. Thus, the said judgment has no application in the facts and circumstances of the present case. In the present case, the stand of the petitioner is that they are not defaulters and did not suffer any disqualification specified under the Act or Rules. In this view of the matter, the judgment of Rajiv Kumar Jain (supra) is of no assistance to the respondents.
18. As analyzed above, it is clear that this Court has interfered on the root of the matter, i.e., action of Registrar in issuing notices and passing the orders, Annexure P/2. It is held that the said action was impermissible in view of the fact that action has already been taken by the society.
19. The above mentioned finding goes to the question of jurisdiction of the authority. Since it goes to the question of competence/jurisdiction, it is not necessary to relegate the petitioners to avail the alternative remedy. In Sanjay Nagaich (supra), the Apex Court opined that "there can be situations where the Registrar is expected to act in the best interest of the society and its members, but in such situation he has to act bonafide and within the fourcorners of the statute. (Para 37). At the cost of repetition, in my view, the Registrar has erred in initiating parallel action. The other judgments cited by Shri Raghvendra Dixit have no application in the facts and circumstances of the case.
20. In view of aforesaid analysis, in my view, it is not necessary now to deal with the aspect whether the notices (Annexure P/6) can be treated as served or not. Other points raised by the parties have also lost significance.
21. Resultantly, the impugned order, Annexure P-2, cannot be permitted to stand. The orders dated 19.8.2014 (Annexure P/2) are, therefore, set aside. The order, Annexure P-1 dated 19.8.2014, is solely based on Annexure P-2. For this reason, Annexure P-1, is also set aside.
22. Petition is allowed. No cost.