K. Padmanabhan Nair, J.
1. When this appeal came up for admission, Sri. T.R. Ramachandran Nair entered appearance for respondent No. 4, Sri. S.P. Aravindakshan Pillai took notice for respondent No. 3 and the learned Government Pleader took notice for respondents 1 and 2. The appeal itself was heard.
2. The petitioner in O.P. 10627 of 2003 has filed this appeal challenging the judgment of the learned Single Judge dated 1.7.2003 dismissing the Original Petition filed by him. The appellant was elected as one of the members of the Board of Directors of the Trivandrum Regional Co-operative Milk Producers Union ('TRCMPU' for short) in the election held on 31.8.2000. He was elected as the Chairman of the Board of Directors also. On 20.10.2000 the third respondent filed a petition before the second respondent for a declaration that the appellant is disqualified to continue as the. Board Member of TRCMPU alleging that the appellant had disqualification to contest the election due to default as he had not repaid a loan of Rs. 29,92,000/- taken from the Parassala Branch of the Trivandrum District Co-operative Bank (hereinafter referred to as 'the Bank'). It was also alleged that the District Co-operative bank had filed an Arbitration Case, No. 22/96, against the appellant and others and that case was still pending. Along with the petition, he produced a copy of the certificate issued by the 4th respondent Bank addressed to the Returning Officer of TRCMPU Ltd. Originally the petition was dismissed. The third respondent filed O.P. 62 of 2001 before this Court. This Court set aside the order passed by 2nd respondent and directed him to reconsider the petition and dispose of the same on its merits after giving the appellant an opportunity to file his objections. The second respondent after considering the petition filed by the third respondent and the objection filed by the appellant found that the appellant was in default and declared that he was disqualified to be a member of the Board of Directors. Against the order of the second respondent the appellant filed an appeal before the first respondent but the said appeal was dismissed. Thereupon the appellant filed O.P. 20929 of 2002. The learned Single Judge dismissed the Original Petition. The appellant filed W.A. 1986 of 2002 challenging the judgment rendered by the learned Single Judge. A Division Bench of this Court allowed the appeal, set aside the orders passed by the second respondent and the appellate authority and remanded the matter for fresh consideration in accordance with law. After remand, on the request of the third respondent certain documents were called by the second respondent from the District Co-operative Bank. The second respondent again passed an order holding that the appellant was in default on the date of his election and hence disqualified to be a member of the Board of Directors. The appellant filed an appeal before the Government. That appeal was dismissed. Thereafter he challenged those orders in O.P. 10627 of 2003. The learned Single Judge found that the statutory authority had examined the matter thoroughly and the appellate authority also considered the matter as is expected from an authority exercising such power. It was further found that there is no error of law on the application of Rules with reference to the facts that had been presented before them and dismissed the Original Petition. That judgment is under challenge in this Writ Appeal.
3. The appellant was a partner of a firm 'Josgo Tiles and Clay Products', a firm registered under the provisions of the Indian Partnership Act. In Ext. P2 it is admitted that there were three partners in that firm. They are, the appellant Sri. K. Surendran Nair, Sri. Y. John and Sri. R. Manoharan Nair. The firm had availed a loan of Rs. 29,92,000/- from the Parassala Branch of Trivandrum District Co-operative Bank for running a factory. The factory was situated in one acre and forty cents of land comprised in Survey No. 463/2A of Parasuvakkal Village. According to the appellant, the unit and the entire land wherein the factory was situated were mortgaged to the Bank as collateral security. It is admitted that another 2 acres of property belonging to the partners were also mortgaged to the Bank. According to the appellant, the firm took a decision to stop the business and made Ext. P3 request to the Bank to take possession of the factory and the properties mortgaged, sell the same and realise the debt utilising the sale proceeds. The case put forward by the appellant is that in spite of several demands, the Bank did not sell the properties mortgaged and adjust the amount towards the loan advanced by the Bank. According to the appellant, value of the securities offered was more than Rs. 81 lakhs. His specific case is that if the properties were sold and the amount adjusted towards the debt due to the Bank, the appellant will not be liable to pay any amount to the Bank; but, amount will be due to him from the Bank. According to the appellant the second respondent ought to have adjudicated that issue and found that no amounts were due to the Bank.
4. It is admitted by the appellant himself that he was one of the partners of a firm by name 'Josgo Tiles and Clay Products, Parasuvaikal' and the firm had obtained a loan of Rs. 29 Lakhs from the Parassala Branch of the Trivandrum District Cooperative Bank and the firm could not repay the amount in time because of the financial difficulties and the firm had stopped the business. It is also admitted by the appellant that the Bank had filed an Arbitration Case and the same is pending.
5. The case of the appellant is that the value of the property pledged was more than Rupees eighty one lakhs in the year 1993 whereas the total amount due from the firm was less than Rupees thirty lakhs and as such the Bank could have easily recovered the entire amount due from the appellant and the other partners of the firm by the sale of the properties mortgaged. Much reliance was placed on Ext. P3 letter signed by all the partners of the firm and addressed to the General Manager, District Co-operative Bank. A reading of Ext. P3 shows that there was no specific request to the Bank to take over the properties mortgaged and sell the same. In Ext. P3 letter all what is stated is that the Bank may take over the unit or recover the amount due to the Bank in accordance with law. A request to the Bank to take over the unit is not a request to take over the mortgaged properties and sell the same. There was no clear request to sell the mortgaged properties. On the other hand, the materials on record show that after writing Ext. P3 letter, the appellant and the other partners sold away the entire properties mortgaged without the knowledge and consent of the Bank and hence the Bank had filed a criminal complaint and the case is being investigated by the Vigilance and Anti Corruption Bureau, Kollam. So, the case put forward by the appellant that they requested the Bank to sell the mortgaged properties for realisation of the amount is not true and is without any bona fides. Even assuming that the appellant had made such a request, that is not a matter which the Registrar could have taken into account while considering a petition filed under Rule 44(2)(c) of the Kerala Co-operative Societies Rules. The Registrar could have only considered whether the appellant was a 'defaulter' or was 'in default' to the society or to any other society on the date of election. As on the date of election admittedly the appellant had not repaid the loan amount and no amount was available with the Bank which could have been adjusted towards the loan amount. Hence the appellant was in default to the Bank on the date of election.
6. It is true that in Kora Kurian v. Deputy Registrar of Co-operative Societies (1981 KLT 868) a learned Single Judge of this Court held that it was incumbent upon the Deputy Registrar of Co-operative Societies to decide with reference to the facts and the circumstances as to whether the person was in default or not in respect of the amount borrowed by him. It was held as follows:-
'It was incumbent upon the 1st respondent to decide with reference to the facts and on the circumstances as to whether the petitioner was in default or not in respect of the borrowing of Rs. 780 by him. In that respect it was also necessary for the 1st respondent to consider the question as to whether the petitioner's case that the sum of Rs. 1,300 and another sum of Rs. 1,509.56 were due to him from the 2nd respondent society to whom the petitioner owed the sum of Rs. 780. It was also necessary to consider the question whether the petitioner was entitled to treat the loan as wiped off as on 15th February 1977 when he to whom the large amount according to him was due from the society made a request to adjust the lesser amount due by him to the society'.
In Kora Kurian's case (supra) it was specifically stated that certain amounts were actually due to the petitioner and he had made a request to adjust the said amounts towards his liability. In the case at hand, the position is entirely different. No amount was stated to be due to the appellant from the Bank and no request was made by him to adjust any such amount towards his liability. Hence the decision in Kora Kurian's case is not applicable to the facts of this case.
7. The sum and substance of the contention of the appellant is that the Bank could have recovered the debt by selling the hypothecated properties. According to us, the appellant who was in default to the Bank is not entitled to contend that the Bank could have realised the amount due to it in accordance with law. It cannot be a defence to a petition filed for disqualifying him under Rule 44(2)(c) of the Kerala Cooperative Societies Rules. The question is whether the appellant was 'in default' or was a 'defaulter' as defined under the Rules at the relevant time. As already stated, the appellant was in default to the Bank on the date of election and hence disqualified under Rule 44(2)(c).
8. The words 'default' and 'defaulter' are defined under the Rules. Rule 2(d) of the Kerala Co-operative Societies Rules defines 'default', which reads as follows:-
'Default' means failure on the part of any person, to repay to the financing bank or to any other society a loan or any other amount due to it within the time fixed for repayment or to return to the society within the time fixed the finished goods in respect of raw materials advanced or to keep any other obligation for the fulfilment of which a time limit has been specified in the bye-laws'.
Rule 2(e) defines the word 'defaulter', which reads as follows:-
'Defaulter' means any Co-operative Society against which or any person against whom a decree has been obtained'.
So, a person can be said to be a defaulter only if a decree has been obtained against him for recovery of money. In this case the third respondent had no case that the Trivandrum District Co-operative Bank had obtained a decree or award against the appellant. On the other hand, the common case of both sides is that the Trivandrum District Co-operative Bank has filed A.R.C. 22 of 1996 against the appellant and the other partners and the same is still pending. Hence the appellant was not a 'defaulter' as defined in the Kerala Co-operative Societies Rules.
9. The petition was filed under Rule 44(3) of the Rules on the ground that the appellant was in default to the Bank on the date of election. Rule 44 of the Kerala Cooperative Societies Rules deals with disqualification of membership of the committee of a Co-operative Society. It has got two limbs. Rule 44(1) enumerates the grounds on which a member of the society shall be ineligible for being elected or appointed as a member of the committee of the society and Rule 44(2) enumerates the grounds on which a member of the committee shall cease to hold office. Rule 44(1)(c) reads as follows:-
44. Disqualification of membership of committee.- (1) No member of the society shall be eligible for being elected, or appointed as a member of the committee of the society under Section 28 if he:
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(c)(i) is in default to the society or to any other society in respect of any loan or loans taken by him or loan in which he had stood surety, for such period, as is prescribed in the bye-laws of the society concerned or in any case for a period exceeding three months or is a defaulter to the society or to any other society;
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Even if the time fixed for repayment is over, that will not automatically attract disqualification. In view of the provisions contained in Rule 44(1)(c)(i) the default must have continued for a period exceeding three months. Rule 44(2)(c) reads as follows:-
'44(2) A- member of the committee shall cease to hold his office as such, if he -
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(c) is subsequently seen to be disqualified under Sub-rule (1) on the date of election itself.
Provided that the disqualification under Sub-clause (1) of Clause (c) of Sub-rule (1) shall be deemed to be accrued only after the expiry of a period of one month from the date of receipt by the member concerned of a notice from the society demanding him to clear off the defaulted amount specified therein and he fails to remit or cause to remit the amount within the said period'.
So, to hold that a member of a committee is subsequently seen to be disqualified under Sub-rule (1) on the date of election, it should be proved that he was in default for a period of three months. It should also be proved that the society had issued a notice to him demanding repayment of the amount but he failed to repay the amount within a period of one month from the date of receipt of the said notice. Once these conditions are satisfied, the Registrar is bound to hold that an elected member of the committee was disqualified for being elected as a member on the date of election itself.
10. In W.A. 1986 of 2002 filed earlier by the appellant, a Division Bench of this Court had held that unless it could be shown that the appellant was in default within the meaning of Rule 44(1)(c)(i) read with Rule 44(2)(c) and the Proviso, the appellant could not be said to have incurred a disqualification. The Writ Appeal was allowed and the judgment rendered by the learned Single Judge and the orders passed by the Government and the Director of Dairy Development were set aside and the matter was remanded for fresh disposal in accordance with law. Both sides were given opportunity to adduce evidence. After the remand, the third respondent filed an application seeking production of certain records from the custody of Trivandrum District Co-operative Bank. Though the prayer was opposed by the appellant, the second respondent allowed the application and issued notice to the Bank for production of the documents. The following documents were produced by the Bank:-
1. Pro note dated 25.5.1990 executed by the appellant and two others in their capacity as partners of M/s. Josgo Tiles & Clay Products in favour of the bank, for the loan of Rs. 29,95,000/- at 12.5% interest.
2. Registered notice dt. 31.3.1992 to the Managing Partner of the firm calling upon him to remit the over due guarantee fees of Rs. 43,380 and commitment charges of Rs. 10304/20 with 12.5% interest.
3. Registered notice dt. 29.5.1992 calling upon the appellant to submit the accounts of the firm.
4. Postal acknowledgment of the above notice signed by the appellant.
5. Registered notice dt. 22.1.1993 addressed to the appellant and two other partners calling upon them to remit Rs. 15,96,195/- due to the Bank.
The documents produced by the Bank reveal the following facts: The appellant along with two others in their capacity as Partners of M/s. Josgo Tiles & Clay Products had borrowed an amount of Rs. 29,95,000/- on 25.5.1990 from the District Co-operative Bank, Trivandrum. The Bank had issued registered notices on 31.3.1992 and 29.5.1992 and again on 22.1.1993 calling upon the appellant and other partners to repay the defaulted amount.
11. As already stated, it is admitted that the Bank had filed A.R.C. 22 of 1996 and the same is still pending. The materials on record show that the appellant and two others as partners of a firm had borrowed amounts from the District Co-operative Bank and that they did not repay the amount within the time allowed by the Bank and that the said default continued for more than three months. Ultimately on 22.1.1993 the Bank issued a notice demanding the appellant to repay the loan amount. The said notice was received by the appellant on 3.2.1993, but he did not pay the amount even after the lapse of one month and till the election was held on 31.8.2000. The appellant has not produced any evidence to show that he had paid the amount demanded by the Bank within one month from 3.2.1993 or any subsequent date. So, the materials on record show that all the ingredients of Rule 44(1)(c)(i) read with Rule 44(2)(c) and the Proviso are satisfied in this case. Hence the finding of the statutory authorities that the appellant's case came within the mischief of Rule 44(1)(c)(i) read with Rule 44(2)(c) and the proviso is correct.
12. The learned counsel appearing for the appellant has raised a contention that the appellant is not a member of the Trivandrum District Co-operative Bank and that the disqualification under Rule 44(1)(c)(i) is not attracted in his case since the amount borrowed by him was not from a society of which he is a member. The learned counsel relied on the decision reported in M. Rajagopalan v. Baby Alex (1994 (2) KLJ 754). However, as rightly observed by the learned Single Judge, the observations contained in the said judgment were mostly in the nature of obiter. At any rate, Rule 44(1)(c)(i) clearly states that no member of the society shall be eligible for being elected or appointed as a member of the committee of the society under Section 28 if he is in default to the society or to any other society in respect of any loan or loans taken by him or loan in which he had stood surety or is a defaulter to the society or to any other society. Hence the disqualification is attracted not only when a member of a particular society is in default to that society but also when he is in default to another society of which he is not a member. There is no stipulation in the Rule that to attract the disqualification, he must be in default to a society of which he is a member. So, there is no merit in the contention raised by the counsel for the appellant that since it is not shown that the appellant was a member of the Trivandrum District Co-operative Bank from which the loan was taken, he cannot be disqualified for being a member of the committee of TRCMPU.
13. It is argued that the petition filed by the third respondent for disqualifying the appellant was not in proper form and not maintainable at all. There is no legal basis for the argument. As per the provisions contained in Rule 44(3), it is not even necessary to file a petition. Rule 44(3) reads as follows:
'If any person is or becomes disqualified to be a member of the committee, the Registrar may on his own motion or on a representation made to him by any member of the society or by its Financing Bank by an order in writing declare that he shall cease to be a member of the committee of the society concerned from that date of such disqualification. Before passing an order, the Registrar shall give such person an opportunity to state his objections, if any, against the proposed action and if the person wishes to be heard, he shall be given an opportunity to be heard'.
A reading of Rule 44(3) shows that the Registrar can suo motu initiate action. He can initiate action on a mere representation also. In view of the provisions contained in Rule 44(3) of the Rules, the law regarding pleadings in civil cases cannot be imported while deciding a representation under that Rule.
14. The learned counsel appearing for the appellant relying on a decision reported in Peter v. Aravindakshan (1998 (2) KLT 729) has argued that the application filed in this case is defective. In Peter's case (supra) this Court was considering the question of fee payable on an election petition filed under Rule 67(7)(a) of the Rules. The principles laid down in that decision can have no application to the facts of this case.
15. From what is stated above, it is clear that there is no merit in this Writ Appeal and the same is only to be dismissed.
In the result, the Writ Appeal is dismissed.