Judgment:
ORDER
Anand Byrareddy, J.
1. These petitions are heard and disposed of together as they pertain to the same society arising out of the same set of circumstances.
2. The petitioner in WP 14712/2009 is presently the Honorary Secretary of the Karnataka State Cricket Association (Hereinafter referred to as the 'KSCA' for brevity). He is a former international cricketer and has held many positions including the post of the Director, National Cricket Academy and was also the. Chairman, of the Selection Committee, Board of Cricket Control in India, to mention two.
3. The Petitioner states that respondents 5 and 6, who are members of KSCA, are said to have filed an application purportedly under Section 25 of the Karnataka Societies Registration Act, 1960, (Hereinafter referred to as the KSR Act, for brevity) calling upon the Registrar of Societies to hold an enquiry into alleged financial and other irregularities in the management of KSCA. Pursuant to the same, the Secretary, KSCA was issued a notice dated 1.9.2007 calling upon him to reply to the allegations. As the petitioner who was the Secretary at that point of time, had not replied to the same, another notice dated 3.10.2008 was issued reiterating the same. The petitioner was served with a third notice dated 4.11.2008 to the same effect. The petitioner ts said to have filed a detailed statement in reply to the same on 4.11.2008.
The petitioner contends that the allegations were false and baseless and were obviously intended to tarnish the name of the petitioner and to prevent him from being elected as the Secretary at the ensuing election of officer-bearers of KSCA, which was slated a few months after the date of the application.
In any event the allegations related to three issues: Firstly that KSCA had entered into certain contracts with (a) M/S. Composite Travels Private Limited (b) M/s S.K. Ram and Sons, M/s Atlanta pumps private Ltd., and (c) Sporting Frontiers (India) Private Limited and that the Petitioner as Secretary and one S.K. Ramdhyani (who is the petitioner in WP 14713/2009) and one other B.N. Subramanya, a member of the Financial Advisory Committee of KSCA, each of whom had interests in one or the other of the above entities, had facilitated and channelized business transactions of KSCA in favour of the said entities thereby enriching themselves and causing loss of revenue to KSCA. More particularly, it was alleged against the petitioner that KSCA had purchased air tickets though M/S. Composite Travels Private Limited, of which the petitioner was the director, for a total sum of Rs. 48 lakh, during the period 2001 to 2007.
The Registrar of Societies, by an order dated 10.12.2008, has appointed respondents 3 and 4 to look into the alleged financial irregularities. It is this, which is sought to be challenged in the above petition.
3. In WP 14713/2009 the petitioner is a member of the Technical Committee of KSCA. He was a member of the managing committee of KSCA during 1999-2004 and the Vice President during 2004-2007. He has sought to challenge the very enquiry ordered on similar allegations made against him, as against the petitioner in WP 14712/2009.
4. In WP 13782/2009, the petitioners are members of KSCA. They are arrayed as respondents in both the above writ petitions. They are the complainants at whose instance the Registrar of Societies has initiated the enquiry under Section 25 of the KSR Act. The relief sought for by them, is for a direction to the Registrar of Societies, and an enquiry officer named by him, to expedite the enquiry initiated. And for a direction to the petitioner in WP 14712/2009 not to function as an officer-bearer of KSCA pending the enquiry.
5. Shri Jayakumar S. Patil, Senior Advocate for the Petitioner in WP 14713/2009 and Shri B.K. Sampath Kumar for the petitioner in WP 14712/2009 contended as follows:
Insofar as the transactions itself are concerned, there is nothing irregular in KSCA having transacted with entities where any office-bearer or other committee member may have an interest. Several instances are cited of such transactions over the years, in the history of KSCA, where this has been an accepted practice. The same cannot by itself be said to result in unjust financial gain to the petitioners or result in a revenue loss to KSCA. In any event all payments have been made after scrutiny as authorised by a Financial Committee. The accounts are duly audited. The signatories to the cheques for any payment to third-parties are the President and the Treasurer. All bills for payment are vouched by internal auditors. All transactions are carried out to the full knowledge of the Managing Committee, the Finance Committee and the Audit Committee as well as the General body.
It is pointed out that the subject, whether transactions involving entities, in which a member of the management has any interest, should be prohibited, was the specific subject matter of discussion by the Managing Committee of KSCA as on 19.5.2007 and it was unanimously opined that the Bye-laws of the KSCA did not prohibit the same and further that there have been innumerable such transactions in the past which were duly approved by the previous Managing Committees. Further on examining the several transactions that had been entered into in the immediate past it was held that the same could continue in the best interests of KSCA.
It is hence contended that the wild allegations of financial mis-management in the complaint, before the Registrar of Companies was not of any significance and the Registrar was not bound to act on the same. In fact, after the issuance of the first notice on 1 9.2007, fee Registrar did not choose to follow it up till he issued e second notice on 3.10.2008. It is clear that it was under outside influence and pressure that die Registrar has chosen to proceed from that stage and not of his own motion. For a further notice was issued on 4.11.2008 again calling upon the petitioners to furnish their explanation regarding the allegations. It is now on record, that the Minister for Co-operation of the State Government has by his letter dated 25.11.2008, issued a direction to the Registrar of Societies to appoint a Senior Officer to hold an enquiry in to the alleged financial irregularities of KSCA and to submit a report on the matter within 10 days. It is pursuant to this direction that the Registrar of Societies has passed the impugned order. By the order, the Registrar has directed the enquiry officer to conduct an enquiry in respect of the following:
(a) To verify the financial transactions amounting to Rs. 5,23,6067- of S.K. Ram and sons and Rs. 3,05,311/- of Atlanta Pumps Private Limited with the Karnataka State Cricket Association.
(b) To verify the financial transaction of M/s Composite Travels Private Limited amounting to Rs. 47,90,052/- (2001-2007) with the Karnataka State Cricket Association.
(c) To verify the financial transactions of M/s Sporting Frontiers India Private Limited (now known as Frontiers Group India Private Limited) with the Karnataka State Cricket Association.
(d) To investigate into the transactions of M/s Stella India Private Limited with the Karnataka State Cricket Association.
(e) To verify the commercial transactions of the managing committee members.
(f) To verify all other irregularities noticed during inquiry.
It is contended that it is only items (a) to (c) that were the subject matter of the application. It is inexplicable that the Registrar has included items (d) and (e). These circumstances would clearly disclose that it Is the commandment issued by the minister and influence brought by the complainants that has prompted the Registrar to exercise statutory power and not on account of a dispassionate application of mind to the nature of allegations and the detailed explanation furnished in respect of the allegations.
In the circumstances, the Registrar was purportedly acting on his own motion, as there was no application filed either by the majority of the Governing body or one-third of the members of the Association as contemplated under Section 25 of the KSR Act. It is apparent that the decision to hold an enquiry has not been on an active application of mind by the Registrar, but at the dictates of the Minister for Co-operation and as sought for by the two complainants.
Insofar as the petitioner in WP 14713/09 is concerned, he has not even been served with a notice, as was said to have been issued to other members. It is after learning of the writ petition said to have been filed by the complainants, through media reports, that the said petitioner has approached this Court.
The petitioner seeks to question the constitutional validity of the words: 'or direct some person authorised by him by order in writing' - appearing in Section 25(1) of the KSR Act as neither the Act or the Rules framed thereunder provide any indication or guidelines as to the qualification or competence of the person to whom the statutory power to hold an enquiry can be delegated by the Registrar. In the absence of any such indication or guideline, the said provision suffers from the vice of excessive delegation and abdication of its essential functions, by the State Legislature.
6. The Additional Government Advocate appearing on behalf of the State and the Registrar of Societies contends that notices had been issued to all the committee members of KSCA on 1.9.2007, 3.10.2008 and 4.11.2008 - to provide an explanation as regards allegations in the complaint said to have been filed by the petitioners in WP 13782-83/2009. According to the Government Advocate, the allegations were serious in nature -namely, that organisations in which office-bearers had a commercial interest had transacted with KSCA to provide goods and services end that it involved huge sums of money - as the allegations could not be brushed aside - it was necessary to enquire into the same. Hence, the order passed by the Registrar cannot be said to be without application of mind.
7. Shri Udaya Holla, Senior Advocate, appearing for the Counsel for the petitioners in WP 13782-83/2009 contends that the petitioners are members who are acutely concerned with stemming the rot, that has set into the affairs of the KSCA and their concerted effort in compelling the authorities to initiate action to ferret out the corrupt and the large- scale irregularities that have been perpetrated by the office-bearers, such as the present Secretary and others of KSCA continues to this day - and the enquiry now initiated is long over due to arrive at the truth and bring the guilty to book. The writ petition is hence brought to seek expedition of the enquiry. And to prevent the present Secretary from adding to his acts of mal-feasance and misfeasance even during the pendency of the enquiry.
Insofar as the petitions brought by the delinquent office-bearers are concerned, it is contended that the same are belated. The impugned order is of 10.122008. The petitions brought in June 2009 are hence belated arid are filed only in order to stall the proceedings.
It is contended that KSCA is a premier sporting body for promotion and ragulation of cricket in the State and is affiliated to the Board of Cricket Control in India. Its activities have gained public importance having regard to the huge popularity that the game enjoys. Consequently, the commercial activities that accompany the game generate transactions involving substantial finances. It therefore is imperative that the management of the affairs is totally transparent without scope for suspicion as to any possible irregularity in the management of its affairs. In the instant case, the admitted involvement of members of the managing committee having an active interest in entities with KSCA continues to have business relationships is a blatant misuse of office and does give room for thought and prima facie would require a competent authority to examine the records to satisfy itself that all is well. It is this exercise that the Registrar is embarked upon. The petitioners' seeking to challenge the same is a reaction that can only be attributed to a delinquent office-bearer fighting shy of exposure. It is pointed out that the irregularities are of the period 1999-2007 when the petitioner in WP 14712/2009 was the Honourary Secretary. The significant circumstance that he had not brought to the notice of the present managing committee of the repeated notices is a further pointer to the shady conduct of the petitioner. The present Managing Committee which is in office since September 2007 was kept in the dark of the same for reasons best known to him. It is for this reason that when notices were issued to all the committee members that atleast eight of them have expressed in writing to the Registrar of Societies that an enquiry would be welcome, while also mentioning that they were unaware of the earlier notices issued to the KSCA through its Secretary. It is pursuant to this that the Registrar has deemed it fit to pass the impugned order.
Shri Holla places reliance on the following authorities:
(a) A.K. Roy v. State of Punjab : (1986)4 SCC 326
in support of the contention that the legislature can always provide for sub-delegation of powers though this is not normally allowable. In the context of the petitioners seeking to question the delegation of power by the Registrar to a named person to hold the enquiry.
(b) Bangalore Grain Merchants Association v. The District Registrar of Societies ILR 2001 Kar. 766 (FB):
wherein it is held that the Registrar could exercise suo motu power on the petition of even a single member if the same is treated as a source of information on which he could act under Section 25.
(c) Bowring Institute v. The District Registrar WA 2044/2008 dated 19.12.2008
Wherein an enquiry had been ordered under Section 25 on the basis of a representation by less than one-third of the total membership. And there was a letter from a minister forwarding a complaint to the Registrar. The order for the enquiry was upheld.
Other authorities are cited in support of the contention that in the instant case on hand mala-fides could not be attributed to the minister who had issued a direction to the Registrar to hold an enquiry, without making the minister a party to this writ petition.
8. The petitioner in WP 14712/2009 has filed a rejoinder to reiterate and emphasize that there are no want of bona-fides on his part and that it is not for respondent- complainants to sustain the impugned order.
9. In the above facts and circumstances, the questions that arise for consideration in these petitions are:
a) Whether the enquiry proceedings initiated against the petitioners in WP 14712/2009 and WP 14713/2009 by the Registrar of Societies under Section 25 of the KSR Act are to be quashed on the grounds urged?
b) Whether the phrase '(sic) or direct some person authorised by him by order in writing' occurring in Section 25(1) of the KSR Act is unconstitutional.
Respondents 5 and 6 in WP 14712/2009 have filed an application before the Registrar of Societies said to be under Sections 25 and 26 of the KSR Act 1960 with a prayer to hold an enquiry with regard to the constitution, working and financial condition of KSCA and with particular reference to alleged acts complained of in the application and to take action against the writ petitioners in WP 14712/2009 and WP 14713/2009.
The Registrar has, by a notice dated 1.9.2007, addressed to the Secretary, KSCA, forwarded the same seeking a reply within seven days.
As there was no reply submitted - the Registrar has issued further notices dated 3.10.2008 and 4.11.2008. A reply has been filed on 4.11.2G08 to the notice by the petitioner in WP 14712/2009. By a letter dated 25.11.2008, the Minister for Cooperation while enclosing a copy of a paper book containing details of alleged mis-management, has directed the Registrar of Societies to appoint a Senior Officer of the Department to conduct an enquiry and to submit an action - taken report within ten days. The Registrar of Societies has, by the impugned order dated 10.12.2008, while citing the complaint, the notices issued, the minister's letter, reply by the petitioner and letters of seven members of the present managing committee, has opined that the two petitioners Brijesh Patel and Ramdhyani had admittedly transacted as office-bearers with entities in which they had interests, in alleged breach of unjust and to their unjust enrichment, by misuse of office, are allegations that would require to be enquired into and has held that the following issues would require to be addressed:
(g) To verify the financial transactions amounting to Rs. 5,23,606/-of S.K. Ram and sons and Rs. 3,05,311/- of Atlanta Pumps Private Limited with the Karnataka State Cricket Association.
(h) To verify the financial transaction of M/s Composite Travels Private Limited amounting to Rs. 47,90,052/- (2001-2007) with the Karnataka State Cricket Association.
(i) To verify the financial transactions of M/s Sporting Frontiers India Private Limited (now known as Frontiers Group India Private Limited) with the Karnataka State Cricket Association.
(j) To investigate into the transactions of M/s Stella India Private Limited with the Karnataka State Cricket Association.
(k) To verify the commercial transactions of the managing committee members.
(l) To verify all other irregularities noticed during inquiry.
And has appointed the named enquiry officer and an assistant, who are both retired Government servants, to submit a report within one month.
A copy of the order is marked to the Honourary Secretary, KSCA with a direction to furnish all relevant records and suitable accommodation for the sittings of the enquiry officer and to provide other facilities and meet such other expenses and extend full co-operation in this regard.
The further proceedings have been stayed by an interim ordej in these proceedings.
The preliminary objection as regards the delay in filing the petitions is adequately explained by the petitioners. Namely, that the petitioner in WP 14712/2009 was abroad for considerable period and hence was not able to challenge the same. And the other petitioner allegedly not having been served with any notice by the Registrar way unaware of the order.
It is seen that a reading of Section 25 of the KSR Act and Rule 8 of the KSR Rules, 1961 - it would seem that there are three situations in which the Registrar can initiate an enquiry. He may act on his own motion, or if a majority of the members of the governing body, or atleast one-third of the members of the society file an application seeking such an inquiry. When he acts on his motion, the exercise of such power is discretionary. But if there is an application made either by a majority of the members of the governing body, or by a minimum of one-third of the members of the society - he shall hold an enquiry. He has no other option. The procedure to be followed by the Registrar, in holding the enquiry is as indicated in Rule 8 of the 1961 Rules. The Rule is extracted for ready reference.
8. Enquiry by the Registrar: (1) Where the Registrar proposed to hold an enquiry under Section 25, either on his own motion or on an application, he or the person authorised by him under the said Section to hold an enquiry shall issue a notice to the society concerned in this behalf.
(2) The said notice shall specify a date on which place in which and the time at which, as also the matters in respect of which the enquiry will be held. The notice shall also call upon the society to furnish its explanation in respect of matters referred to therein before the date specified in the notice.
(3) The society shall furnish its explanation to the Registrar or the authorised person before such date,
(4) On the date fixed for the enquiry, or on such other date or dates to which the enquiry might be adjourned, the Registrar or the authorised person shall give the society a oral hearing. He may also examine such persons as may be considered necessary. He may receive any relevant document. If the society fails to furnish its explanation as required under Sub-rule (3) or to attend the enquiry on the date fixed or the adjourned date the Registrar or the authorised person may proceed with the enquiry ex-parte.
(5) On the completion of the enquiry, the Registrar or the authorised person shall record his findings and communicate the same to the society concerned.
In the present case on hand, the enquiry is proposed to be held on the basis of the complaint, of the above said respondents, prior to 1.9.2007 and a reply to the complaint by the petitioner Brijesh Patel.
The enquiry is not directed into the constitution or its financial condition, but possibly into its 'working' as contemplated under Section 25 of the Act. To wit, the alleged involvement of Brijesh Patel, S.K. Ramadhyani and another, in transactions of the society involving entities in which they had interests and for their enrichment by misuse of office. The power of the Registrar to obtain information and material from any source, in exercising the suo motu power, is not fettered. The Registrar has not found any irregularities in the working of the society by reference to the returns filed by the Society or with reference to any other records of the Society. As the proposal to hold an enquiry is apparently on the basis of the complaint above referred, it ought to be deemed that the Registrar is acting suo-matu. Therefore, it is to be examined whether, prima facie, there was any warrant for such a measure.
There is no indication that the Bye-laws of the society expressly prohibit transactions of a commercial nature as between the society and any of its members of the governing body or other members.
There is no indication that there were any financial irregularities brought to light at any audit of the accounts of the society during the relevant period.
The Registrar has not referred to the contents of the reply submitted by the petitioner - Patel but has merely indicated it as one of the references on the basis of which the enquiry is proposed.
On the other hand while there is no indication of any source from which any issues other than those raised in the complaint could be the subject matter of the enquiry - there are two additional issues inexplicably included as being the subject matter of the enquiry, as rightly pointed out by the Counsel for the petitioner. This, coupled with two other circumstances, would point towards the conclusion of the Registrar being coloured by other influences.
Firstly, the Registrar has not chosen to take any further steps on the complaint after issuance of the initial notice, enclosing a copy of the complaint, on 1.9.2007. It is on 3.10.2008 that a second notice is issued and in a relative sense, there is a flurry of activity thereafter resulting in the impugned order. Namely, the notice of 3.10 2008 is followed by another notice on 4.11.2008. The Minister for Co-operation of the Government of Karnataka, who is said to have been approached has forwarded a copy of a paper book with a direction to conduct an enquiry by a letter dated 25.11.2008. Seven members of the Governing body replied by letters dated 1.12.2008, 29.11.2008, 2.12.2008, 1.12.2008, 2.12.2008, 28.11.2008 and 29.11.2008 produced as Annexures- R-5, R-3, R-7, R-6, R-8, R4, R-10, to the Statement of Objections in writ petition No. 14712/2009 - uniformly stating that the acts of mismanagement and irregularities alleged are in respect of a period prior to their assuming office and they would welcome any enquiry proposed.
The opinion now expressed by the Registrar mat the allegations are serious and would require to be enquired into is what may be termed as a 'knee jerk, reaction' to a ministers directive and unknown sources providing additional information as fodder for a proposed enquiry. There is an apparent absence of independent application of mind in arriving at an opinion. The allegations of the complainant have not only been accepted in toto, but are added to, with additional allegations. While the petitioners reply is not discussed or rejected as being untenable.
While the power of the Registrar to hold an enquiry cannot be questioned - the manner in which that power is exercised and the ramifications of such an exercise on the reputation of personalities involved, especially when the proceedings are given wide publicity in the media - casts the petitioners in a sinister light, of which they can certainly complain as being in violation of their rights and the exercise of such power as being an arbitrary and a biased exercise of power without an active application of mind or any basis.
10. There are other aspects of the matter which require to be noted as rightly contended by Shri Jayakumar S. Patil. Rule 8 contemplates a notice being issued by the Registrar to a Society, whenever he proposes to hold an enquiry under Section 25, either on his own motion or on an application.
The Registrar merely forwarding a copy of the application said to have been tiled by the respondents seeking a reply from the Society, as if the application is one preferred by a majority of the Governing body, or one-third of the members, is to be deprecated. This is a mechanical act on the part of the authority. Apparently the Section itself provides a check on complaints or applications being filed, by all and sundry on which the Registrar ought not to embark on a fishing expedition, as it is clear that he is obliged to conduct an enquiry only if the condition of a majority of the Governing body or one-third of the members of the society seek such an enquiry, is satisfied. Other sources of information compelling him to initiate any action ought to be capable of being accepted on its face value with reference to material available either by way of returns filed by the society or other records readily available. On in a situation where the present notorious activity of any society that may be evident from public records. Representations from disgruntled rival contenders to the posts of office-bearers of the society or even well meaning members of the society, or directions from ministers at the instance of such persons would only result in the action of the Registrar being influenced by the said persons and not on an independent application of mind.
One other aspect that is of concern in the present case is the contention that though without casting aspersions on the persons appointed as the enquiry officer and his assistant, the power delegated to the Registrar under Section 25 of the Act is unbridled. In that, he is authorised to direct 'some person' (sic) in accordance with the Rules, to hold an enquiry - (which the Registrar ought to hold). Such person is also conferred with all the powers that the Registrar possesses in terms of Sub-section (2) of Section 25. The Rules being silent about the qualifications or the suitability of the person who may be authorised by the Registrar to act, in his stead - the consequences can be serious and such unbridled power can also lead to situations beyond the control of the Registrar or even the State.
As a case in point - in the present case, the persons appointed are not in the services of the State Government - they are answerable to none except the Registrar. He, in turn, has no control over them except possibly a personal relationship of acquaintance. There is no provision for the payment of remuneration or expenses of such authorised person. In the present case, the authorised person and his assistant are to be taken care of by the delinquent society. This limb of the argument, however, is not addressed in the present case on hand and is left open. The above observations in any event ought to be taken note of by the State, in providing adequate checks and balances which are certainly warranted.
It is also to be observed that the Hon'ble Ministers of the State Government have their well-defined role in the governance of their concerned department. However, a quasi-judicial power conferred on an authority under a statute, is sacrosanct and ought to be exercised bereft of any interference or influence by the executive government, for otherwise the letter and spirit of the statutory provision and the power conferred on an authority loses its efficacy. In the instant case, the proper course for a Minister who receives a complaint even if it is of general importance is not for him to address it on its merits and express an opinion while forwarding the same to a competent authority, who ought to act upon the same in due course. But to return the same to the sender or the applicant while indicating the appropriate channel through which it ought to be presented for consideration. The effect of a Minister forwarding a representation or a complaint to a departmental official, coupled with a direction to act in a particular fashion cannot be termed as anything other than undue influence. This ought to have been avoided in the present case.
Hence for all of the above reasons, the petitions in WP 14712/2009 and WP 14713/2009 are allowed. Annexure-L dated 10.12.2008 in WP 14712/2009 and Annexure-A dated 10.12.2008 in WP 14713/2009 are quashed. Consequently, WP 13782-13783/2009 do not survive for consideration. However, it is open for the Registrar of Societies to take fresh steps, if in his discretion and on an active application of mind, the same is warranted.