Deepak Saxena and Etc. Etc. Vs. State of M.P. and ors. - Court Judgment

Excerpt:
trusts and societies - nomination of chairman - section 52(4) of m.p. co-operative societies act, 1960 - petitioners were president or chairman of government banks and other societies registered under the act - respondent passed order under section 52(4) of act to nominate collector as chairman of societies so as to perform such duties in co operative society on ground that societies were suffered huge losss and not properly managed - being aggrieved, present petitions filed by petitioners - held, as per provisions, state government empowered to appoint any of the nominated members to nominate as chairman of committee of society - however, aforesaid powers can be exercised when there is specific nomination under section 52(1) of act in respect of society - but in present case, nomination of collector was through the byelaws which could not be considered as nomination under section 52(1) of act - in these circumstances, collector could not be nominated as chairman under section 52 (4) of act - further, collector was nominated by respondent without removing the petitioners from office of president of societies - as per provisions, if office of president of societies not vacant than powers under section 52(4) of act could not be exercised - also no opportunity was given to petitioners to put their points before making appointment - principle of natural justice violated - hence, impugned order sustainable and quashed - petitions allowed - constitution of india. articles 14, 37, 38 & 40: [a.k.patnaik, c.j., s.s. jha & a.m.sapre, jj] sati committed by a villager suspending all aid under central or state schemes to that village - held, if for some good reason such as inability on part of the state government to provide necessary funds, the state government takes a decision not to implement a particular scheme for development of a village, then perhaps the high court in exercise of its power under article 226 of the constitution may not be able to issue any writ or direction to the state government to implement the scheme. this is because provisions contained in part iv of the constitution are not enforceable in any court. but in a case where the state government takes a decision to withhold all financial aid to a village and not to implement any of the schemes of the state government or any of the schemes of the state government or the central government for the development of the village on the ground that some people of the village have committed or abetted the commission of offence, which is punishable under the law, such a decision of the state government would obviously be arbitrary and ultra vires article 14 of the constitution. - the provisions of sub-section (4) of section 52 is a drastic provision which calls for the steps to be taken in which the elected body or committee of the society is mis-managing or is unable to manage the funds of society resulting in corrosion of the share capital resulting in loss to the society as well as the public money invested by the government. the order clearly maintains that the nomination of the collector as chairman is subject to further orders. the same was recommended by shri a. 2078.84 lacs at the end of financial year 2002-03. out of 30 district central co-operative banks of the state, 28 are not complying with the provisions of section 11(1) of the banking regulation act, 1947. a bank categorized as weak according to section 11 is not eligible for getting liberal refinance facility from the nabard unless govt. the chhindwara bank has been classified as a weak bank from 31-3-1998. there is no relaxation available for the liberal credit from the nabard to this bank therefore unless the bank increases its owned reserves and reduces npas it will not be able to serve many thousand member/farmer of primary agriculture cooperative societies affiliated to it. (2) on the failure of the society to take action under sub-section (1), the registrar may after affording opportunity to the officer of being heard and for reasons to be recorded, and communicated to the officer and the society concerned, remove or removed and disqualify for a period not exceeding three years, the officer from holding any office under that society for the period specified in the order. elected person of any statutory body cannot be thrown in the like manner. he may show that he is not at all at fault and after his election the society has infact not suffered any loss or has earned profit, then the authority competent for removal shall consider his reply and if the authority is satisfied with the reply of elected chairman, then the authority shall consider for his continuance in the office. ) contains a very interesting discussion of the subject. ..the requirement that justice should be seen to be done may be regarded as a general principle which in some cases can be satisfied only by the observance of the rules of natural justice or as itself forming one of those rules. the maxim is applicable precisely when the court is concerned not with a case of actual injustice but with the appearance of injustice or possible injustice. if justice was so clearly not seen to be done, as on the afternoon in question here, it seems to me that it is no answer to the applicant to say :well, even if the case had been properly conducted, the result would have been the same'.that is mixing up doing justice with seeing that justice is done (per lord widgery c. in the initial stages it was thought that it had only two elements, namely, (i) no one shall be a judge in his own cause and (ii) no one shall be condemned unheard. to use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and statutory or other frame work in which it operates. in particular, it is well-established that when a institute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedure safeguards as will ensure the attainment of fairness. some of the relevant factors which enter the judicial process of thinking for determining the extent of moulding the nature and scope of fair hearing and may reach to the extent of right to hearing being excluded are :(i) the nature of the subject-matter, and (ii) exceptional situations. dass, air 1987 sc 593 (supra) considering the applicability of natural justice held (para 25) :it is well established that rules of natural justice are not rigid rules, they are flexible and their application depends upon the setting and the background of statutory provision, nature of the right which may be affected and the consequences which may entail, its application depends upon the facts and circumstances of each case. 753, para 101). so far as the audi alteram partem rule is concerned, both in england and in india, it is well established that where a right to a prior notice and an opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. in this process it will be difficult for the committee to prepare and finalise the select list within a reasonable period of time and the very purpose of preparing the select list would be defeated. scheme of the regulations therefore clearly warrants exclusion of principle of audi alteram partem. they are elected persons and enjoy an office of reputation in democratic process.orderk.k. lahoti, j. 1. this batch of petitions involving identical facts and question of law is being decided by this common order. all the petitioners are holding office of chairman/ president of district co-operative central bank or district land development bank or similar other societies, registered under the m.p. co-operative societies act, 1960 (hereinafter referred to as 'act' for short). in all the cases the respondent no. 1 has passed separate orders under section 52(4) of the act, by which the state government has directed that a nominated member, in most of the cases the collector of district, is nominated as chairman of society and to perform such duties in the co-operative society. the description/particulars of petitions, are shown hereunder in a table form so that the picture may be seen at a glance.--------------------------------------------------------------------------------writ name of chairman date of name of bank person nomina-petition of society/petiti- election as or co-operative ted as chairmanoners chairman/ societies and numberpresident place --------------------------------------------------------------------------------717/2004 deepak saxena 27-03-2002 district co-opera- collector,tive central bank, chhindwara chhindwara718/2004 s.k. pandey 01-01-2002 district co-opera- collector, sagartive and rural agr-iculture develop-ment, bank, sagar729/2004 madhusudan verma - district co-opera- collector, betultive central bank, betul730/2004 brijbihari pateriya 04-02-2002 district co-opera- collector, sagartive central bank, sagar731/2004 rama shankar district co-opera- collector, rewamishra 27-03-2002 tive central bank,rewa732/2004 vishwanath dwivedi 18-12-2001 district co-opera- collector, rewative and ruralagriculture deve-lopment bank, rewa770/2004 vishveshwar bhagat 27-03-2002 district co-opera- collector,tive central bank, balaghatbalaghat 771/2004 ghhagan singh 27-03-2002 district co-opera- collector, sisodia tive central bank, rajgarhrajgarh772/2004 sunil bhargava 27-03-2002 district co-opera- collector,tive central bank, seoni seoni773/2004 surendra singh 27-03-2002 district co-opera- collector, jamgod tive central bank, dewasdewas774/2004 karansingh 31-03-2003 district co-opera- collector,anjana tive agricultural ujjainand rural develop-ment bank, ujjain775/2004 mahaveer prasad 27-03-2003 district co-opera- collector, vasistha tive central bank, ujjainujjain779/2004 rajendra singh 29-04-2002 district co-opera- collector,bhadoria tive central bank, sidhisidhi805/2004 tulsiram 27-03-2002 district co-opera- collector,dhumkali tive central bank, mandlamandla831/2004 r.k. tiwari 21-08-2002 district co-opera- collector,tive agricultural tikamgarhand rural develop-ment bank, tikamgarh832/2004 bhagwan singh 30-03-2003 m.p. state secretary,yadav co-operative oil co-operativeseeds growers bhopalfederation ltd., bhopal840/2004 ajay narayan 27-03-2002 district co-opera- collector,mushran tive central bank, narsinghpurnarsinghpur841/2004 surya pratap 11-12-2001 district co-opera- collector,gautam tive agricultural shahdoland rural develo-pment bank, shahdol842/2004 bahadur singh 15-12-2001 district co-opera- collector,gautam tive agricultural chhatarpurand rural develo-pment bank, chhatarpur843/2004 k.b. kurariya 11-12-2001 district co-opera- collector,tive agricultural jabalpur and rural develop-ment bank, jabalpur844/2004 rajendra prasad 27-03-2002 district co-opera- collector, yadav tive central bank, jabalpurjabalpur845/2004 ram chandra 21-12-2001 district co-opera- collector,dangri tive agricultural rajgarhand rural develo-pment bank, rajgarh846/2004 santosh singh 15-12-2001 district co-opera- collector,tive agricultural chhindwaraand rural deve-lopment bank,chhindwara871/2004 kunwar ashok - district co-opera- collector,veervikram singh tive central bank, pannapanna891/2004 kamal singh 15-12-2001 district co-opera- collector,mandloi tive agricultural shajapurand rural develop-ment bank, shajapur892/2004 s.b. singh 02-01-2001 district co-opera- collector,tive agricultural sidhiand rural develop-ment bank, sidhi893/2004 rajiv patle 15-12-2001 district co-opera- collector,tive agricultural balaghatand rural develop-ment bank, balaghat894/2004 rana sayan 18-12-2001 poorva nimar collector,singh district co-op- khandwaerative agri-cultural and ruraldevelopment bank,khandwa901/2004 vishwanath 10-12-2001 district co-opera- collector,singh patel tive agricultural narsinghpurand rural deve-lopment bank, narsinghpur902/2004 shanker lal 15-12-2001 district co-opera- collector,rai tive agricultural damohand rural deve-lopment bank, damoh906/2004 abhay mehta 15-12-2001 district co-opera- collector,tive agricultural sehoreand rural deve-lopment bank,sehore912/2004 sadan kumar 13-01-2002 district co-opera- collector,arya tive agricultural betuland rural deve-lopment bank, betul913/2004 ramvilas patel 15-12-2001 district co-opera- collector,tive agricultural dewasand rural deve-lopment bank, dewas918/2004 rajkumar mishra 30-08-2002 district co-opera- collector,tive agricultural satnaand rural deve-lopment bank, satna942/2004 kuwar vinay 09-04-2002 district co-opera- collector,singh tive central bank, gunaguna944/2004 devendra 27-03-2002 district co-opera- collector,kumar seth tive central bank, damohdamoh1081/2004 narendra singh 11-12-2001 district co-opera- collector,kourav tive agricultural raisenand rural deve-lopment bank, raisen1131/2004 naresh chandra 27-03-2002 district co-opera- collector, jain tive central bank, raisenraisen1624/2004 subhash yadav 21-09-2003 jawahar lal joint regis-nehru sahakari trar, co-ope- agriculture pro- rative socie- duce processing ties, indore society ltd., khargone1868/2004 devi prasad yadav 19-08-2003 jabalpur sahkari commissionerdugdh sangh mar- revenue, yadit, jabalpur jabalpur divi-sion, jabalpur1877/2004 thakur rajendra 09-05-2002 indore dugdh joint regis-singh baghel sangh marya- trar co-opera-dit, indore tive societiesindore--------------------------------------------------------------------------------2-3. all the matters are involving identical set of facts and orders, and are being decided by this common order, the facts are taken from w.p. no. 717/2004 (deepak saxena v. state of m.p. and ors.). petitioner deepak saxena was elected chairman of district co-operative central bank, chhindwara on 27-3-2002. before the election of petitioner as chairman, he was elected as director on 21-3-2002. petitioner represents prathmik sewa sahakari samiti in district central co-operative bank. normal tenure of the chairman is 5 years from the date of his election. petitioner worked as chairman on the date of impugned order for nearabout 22 months. the district central co-operative bank ltd. chhindwara is a co-operative society and duly registered under the provisions of the act. bank is engaged in the business of banking and other ancillary activities. the state government and central government also enforced various public welfare schemes through the bank. the bank was also assigned duty to implement some of the scheme through the primary level societies affiliated to the bank. to implement aforesaid scheme bank has invested huge amount to enforce the scheme of state government and central government. some of the schemes were not profit able, resulting loss to the bank. the aforesaid schemes were implemented much prior to the election of petitioner as president of the bank and the loss was continuing since several years. the bank is having its own bye-laws, copy of which is enclosed along with the petition as annexure p-l. under clause-21 of the bye-laws, following are ex-officio directors :-(a) collector, chhindwara or the person nominated by him, who shall not be below the rank of deputy collector, or in the case of small development bank as project officer.(b) deputy director agriculture, chhindwara.(c) deputy /assistant registrar, co-operative societies.(d) chairman, district co-operative land development bank ltd., chhindwara.(e) regional vipnan adhikari, m.p. rajya co-operative vipnan sangh.section 52(1) of the act empowers the government to nominate up 4 members in the committee of society, where the state government has subscribed to the share capital of society or has assisted indirectly in the formation or augmentation of the share capital of a society as provided in section 45, or has guaranteed the repayment of principal and payment of interest on debentures issued by a society, or has guaranteed the repayment of principal and payment of interest on loans and advances to a society. in aforesaid circumstances up to four specified officers may be nominated as directors of the society. sub-section (4) of 52 provides that the state government who has subscribed to the share capital of or has guaranteed the repayment or principal and payment of interest on loans and advances to, a society to the extent of rupees three lakhs or more and the society 'has incurred loss to the extent of twenty five per cent or more of its owned capital, the state government may, not withstanding anything contained in this act, the rules made thereunder or bye-laws of the society, nominate one of the members nominated by it under sub-section (1) as chairman of the committee of the society. the state government passed an order annexure p-2 on 12-2-2004 by which, the nominated director collector; chhindwara, has been nominated as chairman of district co-operative central bank ltd. chhindwara. the reasons assigned in the order annexure p2 are :- 'that total share capital of the bank is 736.87 lacs and other assets are 2545.24 lacs. total assets and capital are rs. 3282.11 lacs. on 31-3-2003 the loss of bank is of r. 2078.84 lacs. the state government has invested in the share capital rs. 241.46 lacs and the bank as on 31-3-2003 has suffered loss of 63.34%. on 31-3-2001 accumulated loss as per audited account was r. 1530.09 lacs. on 31-3-2002 loss was rs. 1829.11 lacs. the aforesaid facts show that for the last 3 years the bank is in accumulated loss. bank has also not followed section 11 of the banking regulation act, 1947 since 31-9-1998. on the aforesaid grounds it has become necessary to nominate a member nominee under section 52(4) of the act as chairman of the bank'. on the aforesaid ground the order annexure p-2 was issued. with some changes in the dates of capital, assets and loss and its percentage, similar order have been passed in all the cases. these orders are under challenge in all the petitions.4. learned counsel for petitioner has assailed the order, mainly on following grounds:-(1) that the petitioner is an elected chairman of the bank/society. he has not been removed from the office by any legal order. still he is holding the office. without removal of petitioner from the office, another person cannot be nominated as chairman.(2) nominating the collector as chairman of the bank will have an effect of removal of petitioner from the office of chair'-man. the state government has not passed any order of removal of petitioner from the office of chairman, but has nominated the collector as chairman, effect of which is removal of petitioner from the office.(3) the respondents has not issued any show cause notice or provided opportunity of hearing before passing the impugned order. the respondent has not followed principle of natural justice. the order vitiates on this ground alone.(4) that there is specific procedure envisaged under section 53-b of the act for the removal of chairman. the chairman may be removed only after following due procedure of law envisaged under the act and the respondent cannot remove the petitioner in the garb of order under section 52(4) of the act.(5) that under section 52(4) of the act only a nominated member under sub-section (1) of section 52 may be nominated as chairman. in the case of the collector was not nominated by the state government under sub-section (1) of section 52 of the act. though the collector is a nominated member, but by virtue of office t as provided under the byelaws. he being nominated member under the byelaws cannot be said to be a nominee under sub-section (1) of section 52 of the act.(6) that the loss as shown in the impugned order did not relate to the period of petitioner. in most of the cases the petitioners are elected as chairman within a period of 1, 2 or 3 years, while the accumulated loss is continuing since last more than 7 to 10 or more years and petitioner cannot be held liable for the loss.(7) that the aforesaid order is infact political order. in nov. 2003 a new political party has come in power defeating another political party, which was in power prior to nov. 2003. this has motivated the present government to remove the chairman of all the co-operative societies wherein most of the chairman belongs to the party which was in power prior to nov. 2003. on this ground the state government cannot remove elected chairman before completion of normal tenure.(8) there are no allegations against the committee or the chairman of the society, the respondents ought to have followed the procedure under section 53-b of the act, so that the affected persons may get an opportunity to submit their case.(9) that in most of the banks the financial position in last two years has improved. the loss which was recurring since last many years has been reduced. this shows that the present management is efficient and was working for the upliftment of co-operative society. if such an opportunity could have been provided then the petitioner was in a position to submit his case before the respondent no. 1, but the respondent no. 1 without affording any opportunity to existing committee, has passed such an order.(10) that there was no vacancy of the office of chairman. section 52(4) may be invoked only where there is a vacancy. but in absence of vacancy of office of chairman, the collector cannot be nominated as chairman.5. the learned advocate general for the state supported the order passed by the state government annexure p-2. written reply has been filed in the case. contention of respondent is that, section 52 of the act empowers the state government to appoint four nominee members in the committee of co-operative society. the state government is also empowered under sub-section (4) of section 52 to nominate one among the nominated members as chairman of the committee in case the exigency enumerated under sub-section (4) arises. in all the cases, the state government has subscribed to the share capital of co-operative society, which is more than 3 lacs. every co-operative society has incurred loss more than 25% of its own capital. in the circumstances, the state government has invoked the powers under sub-section (4) of section 52, which is within the competence of state government. the provisions of sub-section (4) of section 52 is a drastic provision which calls for the steps to be taken in which the elected body or committee of the society is mis-managing or is unable to manage the funds of society resulting in corrosion of the share capital resulting in loss to the society as well as the public money invested by the government. the state government felt that certain steps are necessary to be taken to prevent any further loss and to protect public money, invoked powers under sub-section (4) of section 52 of the act and the collector, chhindwara who is the nominated member of board of directors under sub-section (1) has been nominated as chairman of bank until further orders. as soon as the financial status of the bank improves and establishes, the position shall be restored. the order clearly maintains that the nomination of the collector as chairman is subject to further orders. there is no mala fide on the part of state government because of political reasons, but on facts it became necessary to invoke power under sub-section (4) of section 52. the state government has invoked power only against 21 out of 38 district central co-operative banks of the state. the power has been exercised after due enquiry and diligence when it was found that the incurred loss is more than 25% of share capital of the bank. the action has been taken oh the basis of enquiry initiated on 3-8-2001 i.e., prior to any political change in the state, after the elections held in 2003. the committee was constituted on 24-7-2001 headed by the then agricultural production commissioner shri a.v. singh to look into the matter and recommend measures and action required to be taken for the improvement of financial condition and management of central co-operative bank. this committee submitted its report recommending action against the banks under section 52(4) and other provisions of the act. audited accounts of all the societies were examined to verify the financial condition of the societies. in the case of district central co-operative bank, chhindwara it revealed that its financial position deteriorated and the loss incurred by the society is to the tune of 63.34% of its capital. in aforesaid circumstances it was decided to take action under section 52(4) of the act. section 52 of the act provides the manner in which action has to be taken under section 52(4) stipulates nomination of a nominated member as chairman of the society notwithstanding anything contained in any rule, act or byelaws. thus, the usual procedure as provided and prescribed in other sections of the act is excluded, including extending opportunity of hearing and show cause notice. section 52(4) excludes applicability of the principles of natural justice, then the petitioner cannot claim any relief. this action of state government cannot be assailed on the ground of non issuing show cause notice or not following principle of nature justice.under section 51(1) of the act, the state government is empowered to nominate four persons in the society, subject to the condition enumerated in paras (a) to (d)the state government issued a notification under sub-section (1) of section 52 on 21-1-1961 by which following authorities were empowered to nominate persons under sub-section (1) of section 52 :-(i) registrar of co-operative society;(ii) additional registrar of co-operative society;(iii) joint registrar of co-operative society;(iv) deputy registrar of co-operative society;(v) assistant registrar of co-operative society.the registrar, co-operative society with a view to uniformly implement provision of section 52 regarding nomination of members in the committee of society undertook statewide exercise to amend byelaws of all the societies including the societies of petitioners, and by exercising powers under section 12 of the act, it was directed to make a specific provision in the byelaws of the society itself providing nomination of members in the committee of the society. directions were issued to nominate following members;-(i) collector of the district;(ii) deputy director agriculture;(iii) deputy/assistant registrar co-operative societies of the district.in this regard a copy of the order by the joint registrar, jabalpur dated 9-1-1989 directing amendment of byelaws and making compulsory to nominate aforesaid persons as directors of the society is placed on record as annexure r-2. it is contended that the collector, chhindwara is nominated member of the committee of district central co-operative bank, chhindwara under e specified authority as notified vide notification dated 21-1-1961 by joint registrar co-operative society, jabalpur. the nomination is under sub-section (1) of section 52 and the state government has rightly directed under sub-section (4) of section 52 to nominate collector, chhindwara as chairman of district co-operative central bank, chhindwara. apart from this, the petitioner is continuing as chairman since last so many tenures and it is the act of petitioner, resulting huge loss in the bank and the action taken by the state is in the large interest of the public. under the byelaws there are two types of nominated members :-(i) under sub-section (1) of section 52;(ii) the nomination of ex-officio as director of the bank.both the nominations are separate. one is under sub-section (1) of section 52 while another is ex officio nomination. the contention of the petitioner that the aforesaid nomination is not under sub-section (1) of section 52 is misconceived. that the state government has not removed the petitioner from the office of elected chairman. the order is issued for the time being and subject to further orders. though the registrar, cooperative societies is empowered to remove the chairman of society under section 53-b of the act, but in this case the powers are not invoked, but the extraordinary power under sub-section (4) of section 52 are exercised by the state government because of the existing circumstances. there is no charge sheet or disqualification against the chairman nor he has been removed. the order nominating chairman as collector is not meet out the exigency because of huge loss in the society. entire purpose of issuing such an order to improve the financial condition and management of the bank. the same was recommended by shri a.v. singh, the then agricultural production commissioner in his report. the action under section 52(4) was contemplated in august 2001 and it was in active consideration of the state government for last more than 2 years. in the meantime elections of the banks were held in the beginning of year 2002 and again past chairman, in most of the cases, elected as chairman. the bank did not make any improvement since petitioner took over as chairman and in w.p. no. 717/2004 it is fourth term. the accumulated loss of rs. 1,530.09 lacs was in the end of financial year 2001 enhanced to rs. 2078.84 lacs at the end of financial year 2002-03. out of 30 district central co-operative banks of the state, 28 are not complying with the provisions of section 11(1) of the banking regulation act, 1947. a bank categorized as weak according to section 11 is not eligible for getting liberal refinance facility from the nabard unless govt. of india based on the performance grants relaxation. the chhindwara bank has been classified as a weak bank from 31-3-1998. there is no relaxation available for the liberal credit from the nabard to this bank therefore unless the bank increases its owned reserves and reduces npas it will not be able to serve many thousand member/farmer of primary agriculture cooperative societies affiliated to it. the reserve bank of india has also issued show cause notice to the central cooperative bank, rewa, shahdol and raisen because of huge losses, why there banking licence be not cancelled. this show cause notice dated 5-10-2002 is on record as annexure r-4. that in all the cases the chairman has neither been removed, nor the board has been superseded, but a corrective measure for improving financial condition of the bank has been taken by way of temporary measure. as soon as the financial status improves and establises, the position shall be restored. the board functioning under the chairmanship of the petitioner could not improve the financial condition of the bank and petitioner could not give positive results since last many years. the district collector being the coordinator and administrator of district machinery, it is expected that after implementation of the impugned order, the collector shall take over as chairman and financial condition of the bank will be improved and the recovery of mounting dues shall be reduced.6. to consider the rival contention of the parties the relevant provisions of the act which are necessary to be referred are quoted hereunder :-'12. power to direct amendment of bye laws -(1) notwithstanding anything contained in this act, or the rules or byelaws on the request of more than fifty per cent, of the member of the society or if the registrar considers that an amendment of the bye-laws of society is necessary or desirable in the interest of such society, he may by an order in writing to be served on the society in the prescribed manner, require the society to make the amendment within sixty days.(2) if the society falls to make the amendment within the time specified by the registrar, the registrar may after giving the society an opportunity of being heard and after soliciting the opinion of such apex federal society, as may be notified by the state government, register such amendment and issue a certified copy thereof to such society :provided that the provisions of this section shall not apply in the case of urban co-operative banks.52. power to appoint government nominees- (1) where the state government -(a) has subscribed to the share capital of a society; or(b) has assisted indirectly in the formation of augmentation of the share capital of a society as provided in section 45; or(c) has guaranteed the repayment of principal and payment of interest on debentures issued by a society, or(d) has guaranteed the repayment of principal and payment of interest on loans and advances to a society; the state government or any authority specified by the state government in this behalf shall have the right to nominate such number of persons not exceeding (four)as it may deem fit on any or all of the committees of such society.(2) a person nominated on the committee of a society under sub-section (1) shall hold office for such period and on such conditions, as may be prescribed. (3) notwithstanding anything contained in this act, every person nominated on the committee of a society under sub-section (1) shall have one vote in such committee;provided that nominated person shall not be entitled to vote in any election of the office bearers of the committee of the society.(4) when the government has subscribed to the share capital of, or has guaranteed the repayment or principal and payment of interest on loans and advances to, a society to the extent of rupees three lakhs or more and the society has incurred, loss to the extent of twenty five per cent, or more of its owned capital, the state government may, notwithstanding anything contained in this act, the rules made thereunder or bye-laws of the society, nominate one of the members nominated by it under sub-section (1) as chairman of the committee of the society and further appoint one of the nominated members as managing director/ general manager /manager of the society.53. supersession of committee(1) if, in the opinion of the registrar, the committee, of any society -(a) is negligent in the performance of the duties imposed on it by or under this act or byelaws of the society or by any lawful order passed by the registrar or is unwilling to perform such duties; or(b) commit acts which are prejudicial to the interests of the society or its members, or(c) violates the provisions of this act or the rules made thereunder or byelaws of the society or any order passed by the registrar; the registrar may, by order in writing, remove the committee and appoint a person or persons to manage the affairs of the society for a specified period not exceeding two years in the first instance :provided that in case of a co-operative bank the order of suppression shall not be passed without previous consultation with the reserve bank :provided further that if no communication containing the views of the reserve bank of india, on action proposed is received within forty five days of the receipt by that bank of the request soliciting consultation, it shall be presumed that the reserve bank of india agrees with the proposed action and the registrar shall be free to pass such order as may be deemed fit:provided also that in case of a co-operative bank, if so required by the reserve bank in the public interest or for preventing the affairs of the co-operative bank being conducted in a manner, detrimental to the interest of the depositors or for securing the proper management of a co-operative bank, the registrar shall pass an order for the supersession of its committee or managing body by whatever name called and for appointment or an administrator therefor for such period or periods not exceeding 5 years in the aggregate, as may from time to time be specified by the reserve bank and on' such appointment the provisions of sub-sections (4), (5), (6) and (8) shall apply as if orders were passed under sub-section (1) :provided also that if a non-official is appointed in the committee of a primary society, he shall be from amongst the members of that society, entitled for such representation and in case of central or apex society, if a person is appointed in the committee of such society, he shall be a member of one of its affiliated societies entitled for such presentation.(2) no order under sub-section (1) shall be passed unless a list of allegations, documents and witnesses in support of charges levelled against it has been provided and the committee has been given a reasonable opportunity of showing cause against the proposed order and representation, if any, made by it, is considered.(3) the period specified in the order under sub-section (1) may, at the discretion of the registrar, be extended, from time to time:provided that no such order shall remain in force for more than three years in the aggregate.(4) the person or persons so appointed, shall subject to the control of the registrar and to such instructions as he may, from time to time, give, have power to exercise all or any of the powers and to discharge all or any of the functions of the committee or of any officer of the society, and to take all such actions, as may be required in the interest of the society.(5) the registrar may fix the remuneration to the person or persons so appointed. the amount of such remuneration and other costs, if any, incurred in the management of the society shall be payable from its funds:(6) the person or persons so appointed shall, before the expiry of the period of his or their appointment, arrange the constitution of a new committee in accordance with the bye-laws of the society.(7) before taking action under sub-section (1) in respect of a financial bank or in respect of a society indebted to a financing bank, the registrar shall consult, in the former case the madhya pradesh state cooperative bank ltd. and, in the latter case, the financing bank concerned, regarding such action. if the madhya pradesh state co-operative bank ltd. or the financing bank, as the case may be, fails to communicate its views within forty five days of the receipt by such bank of the request soliciting consultation, it shall be presumed that the madhya pradesh state co-operative bank ltd. or the financing bank concerned, as the case may be, agreed with the proposed action.(8) notwithstanding anything contained in sections 48, 49 and 50, if there is a difference of opinion between the general body of society and the person or persons appointed under sub-section (1) in respect of any matter, it shall be referred to the registrar for decision and his decision thereon shall be final :provided that if the registrar fails to take any decision within three months of the general body meeting, the decision of the general body of the society shall prevail.(9) nothing in this section shall be deemed to affect the power of the registrar to direct the winding up of the society.(10) during the period between the issuance of notice and the passing of an order removing the committee, the committee may be required by the registrar to function under the supervision, and with the approval of such authority as the registrar may specify in this behalf and no order made or resolution passed or any other act performed by the committee, shall be effectual unless it is approved by such specified authority : provided where the registrar, while proceeding to take action under sub-section (2), is of the opinion that the suppression of the committee during the period of proceeding is necessary in the interest of the society he may suspend the committee, which shall thereupon cease to function and make such arrangement as he thinks fit, of the affairs of the society till the proceedings are completed and order issued under sub-section (1) ;provided further that the period of suspension shall not exceed six months and on the expiry of said period the suspension of the committee shall stand revoked.provided also that, if the committee so suspended, is not superseded after undergoing the proceeding mentioned above, it shall be re-instated and the period during which it has remained suspended shall not count towards its term.provided also that no order of suspension shall be made unless the committee of the society has been given a reasonable opportunity of being heard.(11) notwithstanding anything contained, in this act, the registrar, shall in case of central co-operative banks, urban co-operative banks and primary co-operative land development banks, if the recovery continuously in three co-operative years is less than 65 per cent of the demand or if the over dues exceed 35 per cent, pass an order for removal of the committee or the managing committee by whatever name it is called of the bank and for appointment of a administrator therefor for such period or periods not exceeding five years in the aggregate, as may be specified by the registrar and on such appointment, the provisions of sub-sections (4), (5) and (6) shall apply thereto as if an order was passed under sub-section (1) :provided that no such order shall be made unless the committee has been given a reasonable opportunity of showing cause against the proposed order and representation if any, made by it is considered.(12) when a committee of a society has been superseded under sub-section (1) any member of the committee, notwithstanding anything contained in this act, rules made thereunder or byelaws of the society, shall not be eligible for contesting the election as a member of the committee nor he shall be eligible for co-option or nomination in that society for period of seven years :provided that nothing in this sub-section shall apply to a member of the committee of a society who was not a party of such a decision of the committee which lead to the supersession of it.(13) notwithstanding anything contained in this act, or rules made thereunder or byelaws of society, if the committee of society ceases to function due to order of any court or otherwise, the registrar may appoint a person or committee of persons temporarily till the court order is vacated or the new elections are held and the committee takes charge.53-b power of the registrar to remove an officer of an society in certain circumstances -(1) if in the opinion of the registrar, any officer of the co-operative society has been grossly negligent in the discharge of his duties imposed on him by or under this act the rules made thereunder or byelaws or has by a fraudulent act, caused financial loss to the society the registrar may without prejudice to any other action that may or can be taken against him, call upon the society to remove within a specified period such officer from the office held by him and where necessary also to disqualify him from holding any office under that society for a period not exceeding three years, whereupon the society shall, after affording opportunity to the officer concerned of being heard, pass such orders as it deems fit.(2) on the failure of the society to take action under sub-section (1), the registrar may after affording opportunity to the officer of being heard and for reasons to be recorded, and communicated to the officer and the society concerned, remove or removed and disqualify for a period not exceeding three years, the officer from holding any office under that society for the period specified in the order.(3) an officer removed under the sub-section (1) or sub-section (2) shall with effect from the date of communication of the order, cease to hold that office and if disqualified shall not be eligible to hold any office under that society for the period specified in the order.rule 53 of m.p. co-operative societies rules, 1962 reads as under :-53. appointment of registrar's nominee or board or nominees -(1) the registrar may, by general or special order, appoint any person to be his nominee for deciding disputes arising in any society or class of societies within such area and for such period as may be specified in the order.(2) the registrar may by order appoint a board of nominees consisting of two or more nominees for deciding disputes arising in any society or class of societies within such area and for such period as may be specified in the order.(3) where a board of nominee is appointed under sub-section (2), one of the nominees on the board shall be appointed by the registrar to be the chairman of the board, who shall fix the date, time and place of hearing disputes referred to the board and issue notices in connection with the disposal of such disputes.(4) save where it has been otherwise provided in the act, in deciding the disputes where there is no unanimous decision, the opinion of the majority shall prevail. where opinion of the nominees on the board is equally devided, the opinion of the chairman of the board shall prevail.'7. it is not in dispute that :- (a) the state government has subscribed share capital of the co-operative society, (b) that the state government has right to nominate up to four members in any or all of the committees of the society, (c) that a person nominated under sub-section (1) of section 52 can be nominated as chairman of the committee by the state government. the aforesaid powers are vested with the state government and are not challenged in this petition. main contention in these petitions are :- (a) that the collector was not nominated under sub-section (1) of section 52 of the act, (b) until and unless elected chairman of the co-operative society is removed by the state government, the state government is not empowered to nominate a nominee member under sub-section (1) as chairman of the society, (c) that the principles of natural justice, has been violated.to consider first contention and its reply that the state government by issuing annexure r-1 notification under sub-section (1) of section 52, delegated powers to as many as five authorities to invoke such powers. firstly, it may be seen whether the collector who is nominee member of the society may be treated as a nominee member under sub-section (1) of section 52. under sub-section (1) of section 52 the state government has authorised five officers to invoke the power to nominate such members as they may deem fit for the society. the registrar, co-operative society issued an order under section 12 of the act, by which it has been directed to amend the byelaws and to nominate under the byelaws 3 or 4 persons as the case may be, as government nominee members. section 12 of the act specifically empowers the registrar to issue order directing any co-operative society in a prescribed manner, requiring the society to make the amendment in the bye-laws within a period of sixty days from the date of the order. if the society fails to make the amendment within the time specified by the registrar, the registrar, may after affording the society an opportunity of being heard and after soliciting the opinion of such apex federal society, as may be notified by the state government, register such amendment and issue a certified copy thereof to such society. the aforesaid powers may be exercised by the registrar or the registrar has power to direct any society to amend byelaws. it is not in dispute that such power was exercised by the registrar and the society in question in compliance of orders of registrar amended the byelaws and as per model byelaws, following amendment was included in the byelaws of every co-operative society :- 'nominated by the state :-(1) the collector, chhindwara or any other officer nominated by him, who is not below the rank of deputy collector or project officer of any scheme in force in the district.(2) deputy director, agriculture.(3) deputy registrar, co-operative society.it is also provided that the aforesaid ex officio directors shall not have any right to vote in the election.'8. to consider the question whether the aforesaid nomination is under section 52 or not, following facts may be seen. under sub-section (1) of section 52 it is specifically provided that the state government or any authority specified by the state government in this behalf shall have right to nominate such numbers of persons not exceeding four as it may deem fit of any or all of the committees of such society. sub-section (2) of section 52 also provides that a person nominated on the committee of a society under sub-section (1) shall hold office for such period and on such conditions as may be prescribed. sub-section (4) of section 52 provides that the state government may nominate one of the members nominated by it under sub-section (1) as chairman of the committee of the society. aforesaid all the three provisions if read together, the natural interpretation which may be arrived is that it requires a specific nomination either by the state government or by any authority specified by the state government. thus a specific nomination under sub-section (1) of section 52, is the requirement. if aforesaid provision is implemented under the byelaws without specifying it by the registrar or by any authority specified by the state government, then it will not be a nomination under section 52(1). apart from this if the order annexure r-2 is seen, nowhere it provides that the aforesaid nomination is for the purpose of sub-section (1) of section 52. sub-section (2) of section 52 provides that the nomination shall be for such period and on such condition as may be prescribed, but the aforesaid requirement does not find place in order of registrar directing amendment of byelaws annexure r-2 or in the nomination annexure r3. under sub-section (1) of section 52 the powers of state government may be delegated to the authority specified by the state government, but the aforesaid byelaws provide that the collector may also nominate any other person not below the rank of deputy collector or project officer of any project prevailing in the district. a delegatee of the state cannot again delegate his authority to some other person. the nomination must be specific under sub-sections (1) and (2) of section 52. the powers are vested to the state government to safeguard its interest, where conditions enumerated in clauses (a), (b), (c) and (d) of sub-section (1) of section 52 are in existence and not in the case of each and every society, as directed by the registrar, by orders annexure r2 and annexure r3. issuing orders to amend bylaws under section 12 is entirely different statutory act, while the nomination under sub-section (1) of section 52 is a different act. the authority may be the same for the purpose of nomination, but the orders are required under the specific section. the authority ought to have invoked specific power for specific purposes under the act for the nomination. the nomination has to be made in accordance with the provisions of section 52(1) and (2) and the aforesaid powers cannot be exercised by invoking powers under section 12 of the act. both are different and distinct powers and are to be invoked in different situations. though the registrar is having power under section 12 to issue directions to the co-operative societies to nominate director, to the collector or his nominee, or any other government officer and if a cooperative society has followed the aforesaid directions or has made a provision in the byelaws to nominate the collector or deputy collector as the case may be as director of bank, the net result of the collector is a nominee under the byelaws in compliance of the order issued by the registrar under section 12 of the act and not under sub-section (1) of section 52. there maybe societies in which the state government has not subscribed share capital or has not assisted funds in the formation or augmentation of the share capital of a society or has not guaranteed the repayment of principal and payment of interest on debentures issued by a society or may not have guaranteed the repayment of principal and payment of interest on loans and advances to a society. in those societies no person can be nominated as member of the committee under sub-section (1) of section 52. section 52(1) enumerates circumstances in which a person may be nominated by the state government or by the authority specified by the state government. until and unless aforesaid circumstances exist there is no need to nominate a person under sub-section (1) of section 52. apart from this the law has provided discretion to the state government or the authorities specified to nominate such persons for such a period and for such condition as may be prescribed necessary. but, such circumstances may not exist in every society. while under section 12 no such conditions are necessary in respect of any of the cooperative societies of the state.9. the order annexure r-2 issued on 9-2-1989 under sub-section (2) of section 12 provides that because of some amendment it became necessary to amend byelaws, and proposed amendment was circulated for inviting objections. these amendments are in general. while no objection can be invited towards nomination under section 52 (1) of the act. though the order annexure r-2 relates to district cooperative central bank ltd., chhindwara, but it is stated that similar directions were issued to all the societies of the state. the nomination of collector and other officers are shown as 'nominees of the state', but nowhere in the byelaws it is provided that these nominees are under section 52 (1) of the act. for the sake of arguments if it is presumed that aforesaid nomination is under section 52 (1) of the act, even then the requirements envisaged under section 52 (1) does not fulfil. the provision specifically provides certain circumstances in which the state government may nominate up to four persons. the entire idea behind nomination under sub-section (1) is that the government may nominate even individual or officials as it may deem fit on any or all of the committees of the society. but incorporation of aforesaid, if presumed under sub-section (1) of section 52, will defeat the entire purpose of nomination under sub-section (1). the inclusion of nomination in byelaws will also defeat the provision of sub-section (2) of section 52, where it is provided that a nominated person shall hold office for such period and on condition as may be prescribed. the aforesaid nomination also provides that the nominated member shall have no right to cast the vote. this is again contrary to the provision of sub-section (3) of section 52. sub-section (3) provides that every person nominated on the committee of society shall have one vote in the said committee, but that nominated person shall not be entitled to vote in any election of office bearer of the committee of society. by such nomination by byelaws, the right under sub-section (3) has been curtailed which cannot be restrained in such manner by joint registrar directing bank to amend byelaws under section 12. the joint registrar is a deligatee of powers under sub-section (1) of section 52. he cannot do so without getting such authority from the state. all the aforesaid circumstances show that the aforesaid nomination under the byelaws is an exercise of powers under section 12 of the act, which provides powers to the registrar to direct amendment of byelaws, but it cannot be said that by such order, powers under sub-section (1) of section 52 were exercised.10. in view of the aforesaid discussion, i find that the order annexure r-2 and r-3 does not confirm the requirement of sub-sections (1), (2) and (3) of section 52 and nomination of byelaws cannot be deemed or presumed that the nomination is under sub-section (1) of section 52.11. it is not in dispute that the condition enumerated in clauses (a), (b), (c) and (d) of sub-section (1) of section 52 are existing in all the societies in question. the state government is empowered to appoint any of the nominated members to nominate as chairman of the committee of society. the aforesaid powers may be exercised when there is a specific nomination under sub-section (1) of section 52 in respect of society. but as stated hereinabove, the nomination of collector by orders annexure r-2 and annexure r-3 through the byelaws is not a nomination under sub-section (1) of section 52. in these circumstances, the collector cannot be nominated as chairman under section 52 (4).12. now the important question whether by the impugned order petitioner has been removed from the office of chairman or he has been bypassed or kept in curtain for the time being, till the impugned order remains in force, may be seen. as the learned advocate general during the course of arguments explained that the petitioners shall remain as chairman, but for the time being they will remain behind the curtain and the entire function of the bank shall be managed by the nominated chairman. whether such course is available under sub-section (4) of the act that, without removal of elected chairman another chairman may be nominated and the existing chairman shall remain behind the curtain or vacancy of the office of chairman is necessary for the nomination of chairman under sub-section (4)?13. to appreciate this question, it is necessary to look into the incorporation of sub-section (4) of section 52 in the statute book. by 1976 amendment, section 52 was amended by inserting sub-section (4). another amendment in the act is incorporation of section 53-b, empowering the registrar to remove an officer of; the society in certain circumstances. section 53-b -provides a complete procedure in itself, empowering registrar to remove an office bearer of the society which includes chairman of the society. for the first time these two provisions were incorporated in the act. section 53-b as quoted hereinabove provides that, if in the opinion of registrar any officer of cooperative society has been1 grossly negligent in the discharge of his duties imposed on him by or under this act; the rules made thereunder or byelaws or has, by a fraudulent act, caused financial loss; to the society the registrar may without prejudice to any other action that may or can be taken against him, call upon the society to remove within a specified period such officer from the office held by him and where necessary also to disqualify him from holding any office under that society for a period not exceeding three years. on receiving this direction the society shall after affording opportunity to the officer concerned of being heard, pass such orders as it deems fit. if the society does not take any action under sub-section (1), the registrar may after affording opportunity to the officer of being heard and for reasons to be recorded, and communicated to the officer and the society concerned, remove or removed and disqualify the officer for a period not exceeding three years. this provision was incorporated for the first time on 15th march 1976. before this, the powers were exercisable under section 53 of the act. section 53-b though provides for removal, but does not provide any power for filling-up of vacancy so occurred by removal. it appears that in peculiar circumstances, the power under sub-section (4) of section 52 was envisaged in respect of special category of societies by nominating chairman of the society. but the fact remains that until and unless any office is vacant, whether any other person may be nominated as chairman? though this question has been tried to be explained by learned advocate general, but unsatisfactorily. how the state government may nominate a chairman for the society, whereas another elected person is already functioning and that too without his removal? section 52 is silent in respect of removal of existing/elected chairman. then a harmonious consideration is to be given to the provision. until and unless said office is vacant, the power under section 52 (4) cannot be invoked. the state government to take care of the situation, when the office is vacant or new election cannot be held forthwith, may nominate any person, so nominated under sub-section (1) of section 52 as chairman of the society, so that the society may continue to function. but in no case, when a chairman is functioning or holding the office without his removal from the office, another person can be nominated. it cannot be said that the said person shall go behind the curtain and nominated chairman shall work and discharge the function. all this cannot be done, until there is specific provision in this regard. therefore the argument of learned advocate general has no legs to stand. even for the moment if it is assumed that the state government has power to nominate a person under sub-section (4) of section 52 and by invoking of aforesaid provision shall have effect of removal of elected chairman, then in a democratic process the elected person who is holding the office by virtue of election under the statute requires one opportunity of hearing, or even of show cause before his removal. elected person of any statutory body cannot be thrown in the like manner. he must get opportunity to explain the circumstances against him before his removal. he enjoys a elected office of reputation with responsibility. he holds the office after election from the members of the society, may be shareholders and/or borrowing members. but when the members of the society or general body of members, in whom the final authority in the society is vested, has shown its confidence in a member by electing him chairman of the society, he cannot be removed from the office, without affording him proper opportunity. the principle of natural justice requires that a person who is removed from the office should know what is the cause or his act in this regard, resulting in his removal. he may show that he is not at all at fault and after his election the society has infact not suffered any loss or has earned profit, then the authority competent for removal shall consider his reply and if the authority is satisfied with the reply of elected chairman, then the authority shall consider for his continuance in the office. though the petitioner in some of the cases has tried to convince this court that in past the collector of district was officiating as chairman and in his tenure the society had suffered loss, but at present there is no specific datas available in this regard and i am not inclined to decide this issue at this juncture without full facts. but the fact remains that before passing the impugned order, the state government has not issued any show cause notice or afforded opportunity of hearing to the elected chairman of society.14. the apex court in state of mysore v. allum karibasappa, air 1974 sc 1863 considering similar circumstances held thus (paras 16 to 19) :'in the present case, the impeached orders suffer from two insurmountable infirmities. one is that the entire committee of management has been superseded. there is a provision under section 30 of the act to supersede the management. the state government does not take recourse to the section. indirectly the state government has overthrown the committee of management including the president and the vice-president. the president and the vice-president are officers within the meaning of section 2 (g) of the act. section 54 does not confer any power to remove the president and the vice-president of the society. section 54 contemplates exercise of control over the conduct of the business. the word 'control' suggests check, restraint or influence. control is intended to regulate and hold in check and restrain from action. in the guise of exercising control the state has displaced the committee of management and substituted its own committee. the state has indirectly intended to achieve what it is directly prohibited from doing under section 54 of the act.the second vice of the notification is that it is in violation of principles of natural justice. section 30 of the act contemplates a notice where the state intends to supersede the management. the committee has been deprived of their right to manage the affairs of the society. they have been deprived of the right arbitrarily and in utter defiance of the powers under the statute.the high court rightly set aside the impeached notifications.'the apex court in s.l. kapoor v. jagmohan, (1980) 4 scc 379 : air 1981 sc 136 held thus (para 24) :-the matter has also been treated as an application of the general principle that justice should not only be done but should be seen to be done. jackson's natural justice (1980 edn.) contains a very interesting discussion of the subject. he says :the distinction between justice being done and being seen to be done has been emphasised in many cases............the requirement that justice should be seen to be done may be regarded as a general principle which in some cases can be satisfied only by the observance of the rules of natural justice or as itself forming one of those rules. both explanations of the significance of the maxim are found in lord widgery c.j.'s judgment in r. v. home secretary, ex. p. hosenball, 1977 (1) wlr 766 where after saying that 'the principles of natural justice are those fundamental rules, the breach of which will prevent justice from being seen to be done' he went on to describe the maxim as 'one of the rules generally accepted in the bundle of the rules making up natural justice'.it is the recognition of the importance of the requirement that justice is seen to be done that justifies the giving of a remedy to a litigant every when it may be claimed that a decision alleged to be vitiated by a breach of natural justice would still have been reached had a fair hearing been given by an impartial tribunal. the maxim is applicable precisely when the court is concerned not with a case of actual injustice but with the appearance of injustice or possible injustice. in altco ltd. v. sutherland donaldson, 1971 (2) lloyds rep 515, said that the court, in deciding whether to interfere where an arbitrator had not given a party a full hearing was not concerned with whether a further hearing would produce a different or the same result. it was important that the parties should not only be given justice, but, as reasonable men, know that they had justice or 'to use the time hallowed phrase' that justice should not only be done but be seen to be done. in r. v. thames magistrates court, ex.p. polemis, 1974 (1) wlr 1371, the applicant obtained an order of certiorari to quash his conviction by a stipendiary magistrate on the ground that he had not had sufficient time to prepare his defence. the divisional court rejected the argument that, in its discretion, it ought to refuse relief because the applicant had no defence to the charge.it is again absolutely basic to our system that justice' must not only be done but must manifestly be seen to be done. if justice was so clearly not seen to be done, as on the afternoon in question here, it seems to me that it is no answer to the applicant to say : well, even if the case had been properly conducted, the result would have been the same'. that is mixing up doing justice with seeing that justice is done (per lord widgery c.j. at page 1375).in our view the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. the non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary. it ill comes from a person who has denied justice that the person who has been denied justice is not prejudiced. as we said earlier where on the admitted or indisputable facts only one conclusion is possible and under the law only one penalty is permissible, the court may not issue its writ to compel the observance of natural justice, not because it is not necessary to observe natural justice but because courts do not issue futile writs. we do not agree with the contrary view taken by the delhi high court in the judgment under appeal.'in dr. rash lal yadav v. state of bihar, (1994) 5 scc 267 : 1994 air scw 3329. apex court considering the applicability of natural justice and fairness in action held in absence of contrary indication in statute, procedural fairness is an implied mandatory requirement to protect arbitrary action where statute confers wide power coupled with wide discretion on the authority. the apex court held thus (para 6) :-the concept of natural justice is not a static one but is an ever expanding concept. in the initial stages it was thought that it had only two elements, namely, (i) no one shall be a judge in his own cause and (ii) no one shall be condemned unheard. with the passage of time a third element was introduced, namely, of procedural reasonableness because the main objective of the requirement of rule of natural justice is to promote justice and prevent its miscarriage. therefore, when the legislature confers power in the state government to be exercised in certain circumstances or eventualities, it would be right to presume that the legislature intends that the said power be exercised in the manner envisaged by the statute. if the statute confers drastic powers it goes without saying that such powers must be exercised in a proper and fair manner. drastic substantive laws can be suffered only if there are fairly and reasonably applied. in order to ensure fair and reasonable application of such laws courts have, over a period of time, devised rules of fair procedure to avoid arbitrary exercise of such powers. true it is, the rules of natural justice operate as checks on the freedom of administrative action and often prove time consuming but that is the price one has to pay to ensure fairness in administrative action. and this fairness can be ensured by adherence to the expanded notion of rule of natural justice. therefore, where a statute confers wide powers on an administrative authority coupled with wide discretion, the possibility of its arbitrary use can be controlled or checked by insisting on their being exercised in a manner which can be said to be procedurally fair. rules of natural justice are, therefore, devised for ensuring fairness and promoting satisfactory decision-making. where the statute is silent and a contrary intention cannot be implied the requirement of the applicability of the rule of natural justice is read into it to ensure fairness and to protect the action from the charge of arbitrariness. natural justice has thus secured a foothold to supplement enacted law by operating as an implied mandatory requirement thereby protecting it from the vice of arbitrariness. courts presume this requirement in all its width as implied unless the enactment supplies indications to the contrary as in the present case. this court in a.k. kraipak v. union of india, air 1970 sc 150 (at p. 156) after referring to the observations in state of orissa v. dr. (miss) binapani dei, air 1967 sc 1269 observed as under (scc p. 272, para 20) :'the aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. these rules can operate only in areas not covered by any law validly made. in other words they do not supplant the law of the land but supplement it.'these observations make it clear that if the statute, expressly or by necessary implication omits the application of the rule of natural justice, the statute will not be invalidated for this omission on the ground of arbitrariness.what emerges from the above discussion is that unless the law expressly or by necessary implication excludes the application of the rule of natural justice, courts will read the said requirement in enactments that are silent and insist on its application even in cases of administrative action having civil consequences. however, in this case, the high court has, having regard to the legislative history, concluded that the deliberate omission of the proviso that existed in sub-section (7) of section 10 of the ordinance (1980) while re-enacting the said sub-section in the act, unmistakably reveals the legislature's intendment to exclude the rule of giving an opportunity to be heard before the exercise of power of removal. the legislative history leaves nothing to doubt that the legislature did not expect the state government to seek the incumbent's explanation before exercising the power of removal under the said provision. we are in complete agreement with the high court's view in this behalf.the apex court in state of maharashtra v. the jalgaon municipal council, air 2003 sc 1659 considering the fundamental principle of fair hearing incorporated in the doctrine of natural justice and as a rule of universal obligation that all administrative acts or decisions affecting rights of individuals must comply with the principles of natural justice and the person or persons sought to be affected adversely must be afforded not only an opportunity of hearing but a fair opportunity of hearing. the court held thus (paras 30, 31 and 32) :'it is a fundamental principle of fair hearing incorporated in the doctrine of natural justice and as a rule of universal obligation that all administrative acts or decisions affecting rights of individuals must comply with the principles of natural justice and the person or persons sought to be affected adversely must be afforded not only an opportunity of hearing but a fair opportunity of hearing. the state must act fairly just the same as anyone else legitimately expected to do and where the state action fails to satisfy the test it is liable to be struck down by the courts in exercise of their judicial review jurisdiction. however, warns prof. h.w.r. wade that the principle in flexible. 'the judges, anxious as always to preserve some freedom of manoeuvre, emphasise that 'it is not possible to lay down rigid rules as to when the principles of natural justice are to apply; nor as to their scope and extent'. their application, resting as it does upon statutory implication, must always be in conformity with the scheme of the act and with the subject-matter of the case. 'in the application of the concept of fair play there must be real flexibility'. there must also have been some real prejudice to the complainant : there is no such thing as a merely technical infringement of natural justice' (administrative laws, wade and forsyth, eighth edition, 2000, pp. 491-492).the learned authors quote from two authorities in support of preserving flexibility. in russell v. duke of norfolk (1949) 1 all er 109, 118, tucker, lj opined, 'the requirement of natural justice must depend on the circumstances of the case, the nature of the enquiry, the rules under; which the tribunal is acting, the subject-matter to be dealt with, and so forth'. in llovd v. mcmahon, (1987) ac 625, 702, lord bridge stated in his speech, 'the so-called rules of natural justice are not engraved on tablets of stone. to use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and statutory or other frame work in which it operates. in particular, it is well-established that when a institute has conferred on any body the power to make decisions affecting individuals, the courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedure safeguards as will ensure the attainment of fairness.' (administrative law, ibid, at p. 493).the caution of associating rules of natural justice with the flavour of flexibilities would not permit the courts applying different standards of procedural justice in different cases depending on the whims or personal philosophy of the decision maker. the basic principles remain the same; they are to be moulded in their application to suit the peculiar situations of a given case, for the variety 'and complexity of situations defies narration. that is flexibility. some of the relevant factors which enter the judicial process of thinking for determining the extent of moulding the nature and scope of fair hearing and may reach to the extent of right to hearing being excluded are : (i) the nature of the subject-matter, and (ii) exceptional situations. such exceptionality may be spelled out by (i) need to take urgent action for safeguarding public health or safety or public interest, (ii) the absence of legitimate exceptions (iii) by refusal of remedies in discretion, (iv) doctrine of pleasure such as the power to dismiss an employee at pleasure (v) express legislation. there is also a situation which prof. wade and forsyth terms as 'dubious doctrine' that right to a fair hearing may stand excluded where the court forms an opinion that a hearing would make no difference. utter caution is heeded before bringing the last exception into play. (administrative law, ibid at pp. 543-544).'15. the learned advocate general has relied on various judgments of apex court for the proposition that looking to the peculiar facts of present case principles of natural justice are not applicable. in this regard he has placed reliance to the following decisions :1. r.s. dass v. union of india, 1986 supp scc 617 : air 1987 sc 593.2. union of india v. tulsiram patel, (1985) 3 scc 398 : air 1985 sc 1416.3. s.n. mukherjee v. union of india, (1990) 4 scc 594 : air 1990 sc 1984.4. state of punjab v. mahajan sabha, gurdaspur, (1996) 1 scc 538 : air 1996 sc 2153.5. dr. umrao singh choudhary v. state of m.p., (1994) 4 scc 328.6. commissioner of income-tax, new delhi (now rajasthan) v. east west import and export (p) ltd. (now known as asian distributors ltd.) jaipur (1989) 1 scc 760 : air 1989 sc 836.7. oriental insurance co. ltd. v. hansrajbhai v. kodala, (2001) 5 scc 175 : air 2001 sc 1832.8. afzal ullah v. state of u.p., air 1964 sc 264.9. dynamatic hydraulics ltd. v. collector of customs, new customs house, bombay, (1991) 4 scc 251.10. assistant commissioner of commercial taxes (asst.) dharwar v. dharmendra trading company, (1988) 3 scc 570 : air 1988 sc 1247.the apex court in r.s. dass, air 1987 sc 593 (supra) considering the applicability of natural justice held (para 25) :'it is well established that rules of natural justice are not rigid rules, they are flexible and their application depends upon the setting and the background of statutory provision, nature of the right which may be affected and the consequences which may entail, its application depends upon the facts and circumstances of each case. these principles do not apply to all cases and situation. applications of these uncodified rules are often excluded by express provision or by implication. in union of india v. tulsiram patel, (1985) 3 scc 398 : air 1985 sc 1416 (para 101), constitutional bench of this court considered the scope and extent of applicability of principles of natural justice to administrative actions. madon, j. summarised the position of law on this point and observed as follows : (scc p. 479, scc (l&s;) p. 753, para 101).so far as the audi alteram partem rule is concerned, both in england and in india, it is well established that where a right to a prior notice and an opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. this right can also be excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its exclusion; nor can the audi alteram partem rule be invoked if importing it would have the effect of paralysing the administrative process or where the need for promptitude or the urgency of taking action so demands, as pointed out in maneka gandhi case, air 1978 sc 597.in the instant cases statutory regulations do not expressly or by implication apply the rule of audi alteram partem in making the selection. on the other hand the scheme contained under the regulations excluded the applicability of aforesaid rule by implication. select list is prepared each year which ordinarily continues to be effective for a year or till the fresh select list is prepared. if during the process of selection a senior officer is proposed to be superseded by virtue of not being included in the select list, and if opportunity is afforded to him to make representation and only thereafter the list is finalised, the process would be cumbersome and, time consuming. in this process it will be difficult for the committee to prepare and finalise the select list within a reasonable period of time and the very purpose of preparing the select list would be defeated. scheme of the regulations therefore clearly warrants exclusion of principle of audi alteram partem. no vested legal right of a member of the state civil service who after being considered, is not included in the select list, is adversely affected. non-inclusion in the select list does not take away any right of a member of the state civil service that may have accrued to him as a government servant : therefore no opportunity is necessary to be afforded to him for making representation against the proposed supersession.'the apex court in s.n. mukherjee's case, air 1990 sc 1984 (supra) held thus (para 38) :'the object underlying the rules of natural justice 'is to prevent miscarriage of justice' and secure 'fair play in action'. as pointed out earlier the requirement about recording of reasons for its decision by an administrative authority exercising quasi-judicial functions achieves this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decision-making. keeping in view the expanding horizon of the principles of natural justice, we are of the opinion that the requirement to record reasons can be regarded as one of the principles of natural justice which govern exercise of power by administrative authorities. the rules of natural justice are not embodied rules. the extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on the administrative authority. with regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi-judicial functions the legislature, while conferring the said power, may feel that it would not be in larger public interest that the reasons for the order passed by the administrative authority be recorded in the order and be communicated to the aggrieved party and it. may dispense with such a requirement. it may do so by making an express provision to that effect as those contained in the administrative procedure act, 1946 of usa and the administrative decisions (judicial review) act, 1977 of australia whereby the orders passed by certain specified authorities are excluded from the ambit of the enactment. such an exclusion can also arise by necessary implication from the nature of the subject-matter, the scheme and the provisions of the enactment. the public interest underlying such a provision would outweigh the salutary purpose served by the requirement to record the reasons. the said requirement cannot, therefore, be insisted upon in such a case.'in hari pada khan (air 1996 sc 1065) (supra) the apex court held thus (para 5):'the doctrine of principle of natural justice has no application when the authority concerned is of the opinion that it would be inexpedient to hold an enquiry and that it would be against the interest of security of the corporation to continue in employment of the offender-workman when serious acts are likely to affect the foundation of the institution. in union of india v. tulsiram patel (1985) 3 scc 398 : (air 1985 sc 1416) a constitutional bench of this court upheld the validity of the similar provisions under article 311 of the constitution. recently, in slp (c), no. 11659 of 1992 the matter had come up before this court on 13-11-1995, where the validity of a pari materia provision was questioned. this court upheld the validity stating that the above clause will operate prospectively.'relying on aforesaid, learned advocate general contended that in the present case condition enumerated in clauses (a) to (d) of sub-section (1) of section 52 are existing. the collector being a nominee of state under sub-section (1) has been nominated as chairman of the bank, because of the huge loss in the bank. to protect public money this decision has been taken which is in the larger public interest. in these circumstances, the principle of natural justice has been rightly not observed by the state government. the procedure may take its own time and the loss will further accumulate and it is the public who will suffer. by necessary implication under sub-section (4) of section 52 principles of natural justice has been excluded.17. to appreciate the contention of learned advocate general in the light of judgments referred by him and also the judgments referred by learned counsel for petitioners following factual position emerges. the bank is running in accumulated loss since last several years. it is not the case of state that within a short span of period the bank has suffered huge loss or because of some act of the petitioners the money was drained out. the allegations in the petitions are that because of schemes of central and state, which are being implemented through banks the loss has occurred. in some of the cases, it is the contention of the petitioners that after their election the loss has been reduced. in some of the cases it is the contention of the petitioners that they are elected just one or two years back and in past the collector was officiating as the chairman of the bank and there is no fault on the part of petitioners in respect of accumulation of alleged loss. it is also not in dispute that before two or three years of filing of petitions, petitioners were elected as chairman by the general body. they are elected persons and enjoy an office of reputation in democratic process. the shareholders or borrowing members have shown their confidence in the petitioners. the petitioners are also responsible to the general body in this regard. if the state government decides to take some action against the petitioners, then issuing show cause notice and affording opportunity of hearing to the petitioners will not be prejudicial to the interest of bank or public exchequer. if the petitioners are permitted to continue for a short period during the pendency of aforesaid proceedings with some restrictions, it may not affect in any manner the accumulation of loss. but fact remains that the elected persons have been indirectly removed and the collector of concerned district has been nominated as chairman. the collector is nominated director of the bank under the bye-laws. he owes duty to inform the state government in respect of causes of loss or any reformatory measures to be taken. the loss has accumulated in the couple of years and not within the short period. what action these authorities have taken in past is not on record. the state has not placed any material in this regard, except that a committee was constituted in the chairmanship of shri a. v. singh, who submitted some report long back in the year 2001. that report is also not placed on record. what transpired after 2001 is not on record. no report of so called official directors of the bank has been placed on record showing that because of present management the bank has suffered loss or they protested at any point of time in respect of some action of petitioners, resulting loss to the bank. in absence of any material before this court even in the writ petitions, the action of state enforcing powers under sub-section (4) of section 52 without applying principles of natural justice cannot be said to be a fair play, fair action or transparent action. there may be circumstances, in which the principles of natural justice may be excluded, but no such circumstances are placed on record, in which the state government has acted without issuing show cause notice or affording opportunity of hearing. in the facts and circumstances of the case, it is not a case wherein such requirement may be waived or excluded. the petitioners may be held responsible for such loss or any action may be taken against them, if the state government arrives at a finding that because of some mis-management or mis-conduct on the part of petitioners the bank has suffered loss. there is also no explanation on the part of state that without removing the petitioners from the chairmanship of bank, such course is available to the state by nominating collector as chairman.16. in view of the aforesaid, the contention of respondent cannot be accepted that by necessary implications principles of natural justice are excluded or without removing the petitioners from the post of chairman, the collector may be nominated. principles of natural justice ought to have been followed by the respondents, before passing impugned order.17. in view of aforesaid discussion, it is held that the nomination of collector under the bye-laws is not in accordance with the provision of sub-section (1) of section 52 and without removal of petitioners from the office of chairman or till the office of chairman is vacant, powers under sub-section (4) of section 52 cannot be exercised.18. consequently, these petitions are allowed. the impugned order, by which the state government has nominated chairman, is hereby quashed. petitioners are entitled to costs, quantified rs. 1,000/- in each case.

Judgment:
ORDER

K.K. Lahoti, J.

1. This batch of petitions involving identical facts and question of law is being decided by this common order. All the petitioners are holding office of Chairman/ President of District Co-operative Central Bank or District Land Development Bank or similar other societies, registered under the M.P. Co-operative Societies Act, 1960 (hereinafter referred to as 'Act' for short). In all the cases the respondent No. 1 has passed separate orders under Section 52(4) of the Act, by which the State Government has directed that a nominated member, in most of the cases the Collector of District, is nominated as Chairman of Society and to perform such duties in the Co-operative Society. The description/particulars of petitions, are shown hereunder in a table form so that the picture may be seen at a glance.

--------------------------------------------------------------------------------Writ Name of Chairman Date of Name of Bank Person nomina-Petition of Society/Petiti- Election as or Co-operative ted as Chairmanoners Chairman/ Societies and NumberPresident place --------------------------------------------------------------------------------717/2004 Deepak Saxena 27-03-2002 District Co-opera- Collector,tive Central Bank, Chhindwara Chhindwara718/2004 S.K. Pandey 01-01-2002 District Co-opera- Collector, Sagartive and Rural Agr-iculture Develop-ment, Bank, Sagar729/2004 Madhusudan Verma - District Co-opera- Collector, Betultive Central Bank, Betul730/2004 Brijbihari Pateriya 04-02-2002 District Co-opera- Collector, Sagartive Central Bank, Sagar731/2004 Rama Shankar District Co-opera- Collector, RewaMishra 27-03-2002 tive Central Bank,Rewa732/2004 Vishwanath Dwivedi 18-12-2001 District Co-opera- Collector, Rewative and RuralAgriculture Deve-lopment Bank, Rewa770/2004 Vishveshwar Bhagat 27-03-2002 District Co-opera- Collector,tive Central Bank, BalaghatBalaghat 771/2004 Ghhagan Singh 27-03-2002 District Co-opera- Collector, Sisodia tive Central Bank, RajgarhRajgarh772/2004 Sunil Bhargava 27-03-2002 District Co-opera- Collector,tive Central Bank, Seoni Seoni773/2004 Surendra Singh 27-03-2002 District Co-opera- Collector, Jamgod tive Central Bank, DewasDewas774/2004 Karansingh 31-03-2003 District Co-opera- Collector,Anjana tive Agricultural Ujjainand Rural Develop-ment Bank, Ujjain775/2004 Mahaveer Prasad 27-03-2003 District Co-opera- Collector, Vasistha tive Central Bank, UjjainUjjain779/2004 Rajendra Singh 29-04-2002 District Co-opera- Collector,Bhadoria tive Central Bank, SidhiSidhi805/2004 Tulsiram 27-03-2002 District Co-opera- Collector,Dhumkali tive Central Bank, MandlaMandla831/2004 R.K. Tiwari 21-08-2002 District Co-opera- Collector,tive Agricultural Tikamgarhand Rural Develop-ment Bank, Tikamgarh832/2004 Bhagwan Singh 30-03-2003 M.P. State Secretary,Yadav Co-operative Oil Co-operativeSeeds Growers BhopalFederation Ltd., Bhopal840/2004 Ajay Narayan 27-03-2002 District Co-opera- Collector,Mushran tive Central Bank, NarsinghpurNarsinghpur841/2004 Surya Pratap 11-12-2001 District Co-opera- Collector,Gautam tive Agricultural Shahdoland Rural Develo-pment Bank, Shahdol842/2004 Bahadur Singh 15-12-2001 District Co-opera- Collector,Gautam tive Agricultural Chhatarpurand Rural Develo-pment Bank, Chhatarpur843/2004 K.B. Kurariya 11-12-2001 District Co-opera- Collector,tive Agricultural Jabalpur and Rural Develop-ment Bank, Jabalpur844/2004 Rajendra Prasad 27-03-2002 District Co-opera- Collector, Yadav tive Central Bank, JabalpurJabalpur845/2004 Ram Chandra 21-12-2001 District Co-opera- Collector,Dangri tive Agricultural Rajgarhand Rural Develo-pment Bank, Rajgarh846/2004 Santosh Singh 15-12-2001 District Co-opera- Collector,tive Agricultural Chhindwaraand Rural Deve-lopment Bank,Chhindwara871/2004 Kunwar Ashok - District Co-opera- Collector,Veervikram Singh tive Central Bank, PannaPanna891/2004 Kamal Singh 15-12-2001 District Co-opera- Collector,Mandloi tive Agricultural Shajapurand Rural Develop-ment Bank, Shajapur892/2004 S.B. Singh 02-01-2001 District Co-opera- Collector,tive Agricultural Sidhiand Rural Develop-ment Bank, Sidhi893/2004 Rajiv Patle 15-12-2001 District Co-opera- Collector,tive Agricultural Balaghatand Rural Develop-ment Bank, Balaghat894/2004 Rana Sayan 18-12-2001 Poorva Nimar Collector,Singh District Co-op- Khandwaerative Agri-cultural and RuralDevelopment Bank,Khandwa901/2004 Vishwanath 10-12-2001 District Co-opera- Collector,Singh Patel tive Agricultural Narsinghpurand Rural Deve-lopment Bank, Narsinghpur902/2004 Shanker Lal 15-12-2001 District Co-opera- Collector,Rai tive Agricultural Damohand Rural Deve-lopment Bank, Damoh906/2004 Abhay Mehta 15-12-2001 District Co-opera- Collector,tive Agricultural Sehoreand Rural Deve-lopment Bank,Sehore912/2004 Sadan Kumar 13-01-2002 District Co-opera- Collector,Arya tive Agricultural Betuland Rural Deve-lopment Bank, Betul913/2004 Ramvilas Patel 15-12-2001 District Co-opera- Collector,tive Agricultural Dewasand Rural Deve-lopment Bank, Dewas918/2004 Rajkumar Mishra 30-08-2002 District Co-opera- Collector,tive Agricultural Satnaand Rural Deve-lopment Bank, Satna942/2004 Kuwar Vinay 09-04-2002 District Co-opera- Collector,Singh tive Central Bank, GunaGuna944/2004 Devendra 27-03-2002 District Co-opera- Collector,Kumar Seth tive Central Bank, DamohDamoh1081/2004 Narendra Singh 11-12-2001 District Co-opera- Collector,Kourav tive Agricultural Raisenand Rural Deve-lopment Bank, Raisen1131/2004 Naresh Chandra 27-03-2002 District Co-opera- Collector, Jain tive Central Bank, RaisenRaisen1624/2004 Subhash Yadav 21-09-2003 Jawahar Lal Joint Regis-Nehru Sahakari trar, Co-ope- Agriculture Pro- rative Socie- duce Processing ties, Indore Society Ltd., Khargone1868/2004 Devi Prasad Yadav 19-08-2003 Jabalpur Sahkari CommissionerDugdh Sangh Mar- Revenue, yadit, Jabalpur Jabalpur Divi-sion, Jabalpur1877/2004 Thakur Rajendra 09-05-2002 Indore Dugdh Joint Regis-Singh Baghel Sangh Marya- trar Co-opera-dit, Indore tive SocietiesIndore--------------------------------------------------------------------------------

2-3. All the matters are involving identical set of facts and orders, and are being decided by this common order, the facts are taken from W.P. No. 717/2004 (Deepak Saxena v. State of M.P. and Ors.). Petitioner Deepak Saxena was elected chairman of District co-operative Central Bank, Chhindwara on 27-3-2002. Before the election of petitioner as Chairman, he was elected as Director on 21-3-2002. Petitioner represents Prathmik Sewa Sahakari Samiti in District Central Co-operative Bank. Normal tenure of the Chairman is 5 years from the date of his election. Petitioner worked as Chairman on the date of impugned order for nearabout 22 months. The District Central co-operative Bank Ltd. Chhindwara is a Co-operative Society and duly registered under the provisions of the Act. Bank is engaged in the business of Banking and other ancillary activities. The State Government and Central Government also enforced various public welfare schemes through the Bank. The Bank was also assigned duty to implement some of the scheme through the primary level societies affiliated to the Bank. To implement aforesaid scheme Bank has invested huge amount to enforce the scheme of State Government and Central Government. Some of the schemes were not profit able, resulting loss to the Bank. The aforesaid schemes were implemented much prior to the election of petitioner as President of the Bank and the loss was continuing since several years. The bank is having its own bye-laws, copy of which is enclosed along with the petition as Annexure P-l. Under clause-21 of the bye-laws, following are ex-officio directors :-

(A) Collector, Chhindwara or the person nominated by him, who shall not be below the rank of Deputy Collector, or in the case of small Development Bank as project officer.

(B) Deputy Director Agriculture, Chhindwara.

(C) Deputy /Assistant Registrar, co-operative Societies.

(D) Chairman, District Co-operative Land Development Bank Ltd., Chhindwara.

(E) Regional Vipnan Adhikari, M.P. Rajya Co-operative Vipnan Sangh.

Section 52(1) of the Act empowers the Government to nominate up 4 members in the committee of Society, where the State Government has subscribed to the share capital of society or has assisted indirectly in the formation or augmentation of the share capital of a society as provided in Section 45, or has guaranteed the repayment of principal and payment of interest on debentures issued by a society, or has guaranteed the repayment of principal and payment of interest on loans and advances to a society. In aforesaid circumstances up to four specified officers may be nominated as directors of the society. Sub-section (4) of 52 provides that the State Government who has subscribed to the share capital of or has guaranteed the repayment or principal and payment of interest on loans and advances to, a society to the extent of rupees three lakhs or more and the society 'has incurred loss to the extent of twenty five per cent or more of its owned capital, the State Government may, not withstanding anything contained in this Act, the rules made thereunder or bye-laws of the society, nominate one of the members nominated by it under Sub-section (1) as Chairman of the Committee of the society. The State Government passed an order Annexure P-2 on 12-2-2004 by which, the nominated Director Collector; Chhindwara, has been nominated as Chairman of District Co-operative Central Bank Ltd. Chhindwara. The reasons assigned in the order Annexure P2 are :- 'that total share capital of the Bank is 736.87 lacs and other assets are 2545.24 lacs. Total assets and capital are Rs. 3282.11 lacs. On 31-3-2003 the loss of bank is of R. 2078.84 lacs. The State Government has invested in the share capital Rs. 241.46 lacs and the Bank as on 31-3-2003 has suffered loss of 63.34%. On 31-3-2001 accumulated loss as per audited account was R. 1530.09 lacs. On 31-3-2002 loss was Rs. 1829.11 lacs. The aforesaid facts show that for the last 3 years the Bank is in accumulated loss. Bank has also not followed Section 11 of the Banking Regulation Act, 1947 since 31-9-1998. On the aforesaid grounds it has become necessary to nominate a member nominee under Section 52(4) of the Act as Chairman of the Bank'. On the aforesaid ground the order Annexure P-2 was issued. With some changes in the dates of capital, assets and loss and its percentage, similar order have been passed in all the cases. These orders are under challenge in all the petitions.

4. Learned counsel for petitioner has assailed the order, mainly on following grounds:-

(1) That the petitioner is an elected Chairman of the Bank/Society. He has not been removed from the office by any legal order. Still he is holding the office. Without removal of petitioner from the office, another person cannot be nominated as Chairman.

(2) Nominating the Collector as Chairman of the Bank will have an effect of removal of petitioner from the office of Chair'-man. The State Government has not passed any order of removal of petitioner from the office of Chairman, but has nominated the Collector as Chairman, effect of which is removal of petitioner from the office.

(3) The respondents has not issued any show cause notice or provided opportunity of hearing before passing the impugned order. The respondent has not followed principle of natural justice. The order vitiates on this ground alone.

(4) That there is specific procedure envisaged under Section 53-B of the Act for the removal of Chairman. The Chairman may be removed only after following due procedure of law envisaged under the Act and the respondent cannot remove the petitioner in the garb of order under Section 52(4) of the Act.

(5) That under Section 52(4) of the Act only a nominated member under Sub-section (1) of Section 52 may be nominated as Chairman. In the case of the Collector was not nominated by the State Government under Sub-section (1) of Section 52 of the Act. Though the Collector is a nominated member, but by virtue of office t as provided under the byelaws. He being nominated member under the byelaws cannot be said to be a nominee under Sub-section (1) of Section 52 of the Act.

(6) That the loss as shown in the impugned order did not relate to the period of petitioner. In most of the cases the petitioners are elected as Chairman within a period of 1, 2 or 3 years, while the accumulated loss is continuing since last more than 7 to 10 or more years and petitioner cannot be held liable for the loss.

(7) That the aforesaid order is infact political order. In Nov. 2003 a new political party has come in power defeating another political party, which was in power prior to Nov. 2003. This has motivated the present Government to remove the Chairman of all the Co-operative Societies wherein most of the Chairman belongs to the party which was in power prior to Nov. 2003. On this ground the State Government cannot remove elected Chairman before completion of normal tenure.

(8) There are no allegations against the committee or the Chairman of the society, the respondents ought to have followed the procedure under Section 53-B of the Act, so that the affected persons may get an opportunity to submit their case.

(9) That in most of the Banks the financial position in last two years has improved. The loss which was recurring since last many years has been reduced. This shows that the present management is efficient and was working for the upliftment of co-operative society. If such an opportunity could have been provided then the petitioner was in a position to submit his case before the respondent No. 1, but the respondent No. 1 without affording any opportunity to existing committee, has passed such an order.

(10) That there was no vacancy of the office of Chairman. Section 52(4) may be invoked only where there is a vacancy. But in absence of vacancy of office of Chairman, the Collector cannot be nominated as Chairman.

5. The learned Advocate General for the State supported the order passed by the State Government Annexure P-2. Written reply has been filed in the case. Contention of respondent is that, Section 52 of the Act empowers the State Government to appoint four nominee members in the committee of Co-operative Society. The State Government Is also empowered under Sub-section (4) of Section 52 to nominate one among the nominated members as Chairman of the committee in case the exigency enumerated under Sub-section (4) arises. In all the cases, the State Government has subscribed to the share capital of co-operative society, which is more than 3 lacs. Every co-operative society has incurred loss more than 25% of its own capital. In the circumstances, the State Government has invoked the powers under Sub-section (4) of Section 52, which is within the competence of State Government. The provisions of Sub-section (4) of Section 52 is a drastic provision which calls for the steps to be taken in which the elected body or committee of the society is mis-managing or is unable to manage the funds of society resulting in corrosion of the share capital resulting in loss to the society as well as the public money invested by the Government. The State Government felt that certain steps are necessary to be taken to prevent any further loss and to protect public money, invoked powers under Sub-section (4) of Section 52 of the Act and the Collector, Chhindwara who is the nominated member of Board of Directors under Sub-section (1) has been nominated as Chairman of Bank until further orders. As soon as the financial status of the bank improves and establishes, the position shall be restored. The order clearly maintains that the nomination of the Collector as Chairman is subject to further orders. There is no mala fide on the part of State Government because of political reasons, but on facts it became necessary to invoke power under Sub-section (4) of Section 52. The State Government has invoked power only against 21 out of 38 District Central Co-operative Banks of the State. The power has been exercised after due enquiry and diligence when it was found that the incurred loss is more than 25% of share capital of the Bank. The action has been taken oh the basis of enquiry initiated on 3-8-2001 i.e., prior to any political change In the State, after the elections held in 2003. The committee was constituted on 24-7-2001 headed by the then Agricultural Production Commissioner Shri A.V. Singh to look into the matter and recommend measures and action required to be taken for the improvement of financial condition and management of Central Co-operative Bank. This committee submitted its report recommending action against the banks under Section 52(4) and other provisions of the Act. Audited accounts of all the societies were examined to verify the financial condition of the societies. In the case of District Central Co-operative Bank, Chhindwara it revealed that its financial position deteriorated and the loss incurred by the society is to the tune of 63.34% of its capital. In aforesaid circumstances it was decided to take action under Section 52(4) of the Act. Section 52 of the Act provides the manner in which action has to be taken under Section 52(4) stipulates nomination of a nominated member as chairman of the society notwithstanding anything contained in any rule, act or byelaws. Thus, the usual procedure as provided and prescribed in other sections of the Act is excluded, including extending opportunity of hearing and show cause notice. Section 52(4) excludes applicability of the principles of natural justice, then the petitioner cannot claim any relief. This action of State Government cannot be assailed on the ground of non issuing show cause notice or not following principle of nature justice.

Under Section 51(1) of the Act, the State Government is empowered to nominate four persons in the society, subject to the condition enumerated in paras (a) to (d)The State Government issued a notification under Sub-section (1) of Section 52 on 21-1-1961 by which following authorities were empowered to nominate persons under Sub-section (1) of Section 52 :-

(i) Registrar of Co-operative Society;

(ii) Additional Registrar of Co-operative Society;

(iii) Joint Registrar of Co-operative Society;

(iv) Deputy Registrar of Co-operative Society;

(v) Assistant Registrar of Co-operative Society.

The Registrar, Co-operative Society with a view to uniformly implement provision of Section 52 regarding nomination of members in the committee of society undertook Statewide exercise to amend byelaws of all the societies including the societies of petitioners, and by exercising powers under Section 12 of the Act, it was directed to make a specific provision in the byelaws of the society itself providing nomination of members in the committee of the society. Directions were issued to nominate following members;-

(i) Collector of the District;

(ii) Deputy Director Agriculture;

(iii) Deputy/Assistant Registrar Co-operative Societies of the District.

In this regard a copy of the order by the Joint Registrar, Jabalpur dated 9-1-1989 directing amendment of byelaws and making compulsory to nominate aforesaid persons as Directors of the society is placed on record as Annexure R-2. It is contended that the Collector, Chhindwara is nominated member of the committee of District Central Co-operative Bank, Chhindwara under e specified authority as notified vide notification dated 21-1-1961 by Joint Registrar Co-operative Society, Jabalpur. The nomination is under Sub-section (1) of Section 52 and the State Government has rightly directed under Sub-section (4) of Section 52 to nominate Collector, Chhindwara as Chairman of District Co-operative Central Bank, Chhindwara. Apart from this, the petitioner is continuing as Chairman since last so many tenures and it is the act of petitioner, resulting huge loss in the Bank and the action taken by the State is in the large interest of the public. Under the byelaws there are two types of nominated members :-

(i) under Sub-section (1) of Section 52;

(ii) the nomination of ex-officio as Director of the Bank.

Both the nominations are separate. One is under Sub-section (1) of Section 52 while another is ex officio nomination. The contention of the petitioner that the aforesaid nomination is not under Sub-section (1) of Section 52 is misconceived. That the State Government has not removed the petitioner from the office of elected Chairman. The order is issued for the time being and subject to further orders. Though the Registrar, Cooperative Societies is empowered to remove the Chairman of Society under Section 53-B of the Act, but In this case the powers are not Invoked, but the extraordinary power under Sub-section (4) of Section 52 are exercised by the State Government because of the existing circumstances. There is no charge sheet or disqualification against the Chairman nor he has been removed. The order nominating Chairman as Collector is not meet out the exigency because of huge loss in the society. Entire purpose of Issuing such an order to improve the financial condition and management of the Bank. The same was recommended by Shri A.V. Singh, the then Agricultural Production Commissioner in his report. The action under Section 52(4) was contemplated in August 2001 and it was in active consideration of the State Government for last more than 2 years. In the meantime elections of the Banks were held in the beginning of year 2002 and again past Chairman, in most of the cases, elected as Chairman. The Bank did not make any improvement since petitioner took over as Chairman and in W.P. No. 717/2004 it is fourth term. The accumulated loss of Rs. 1,530.09 lacs was in the end of financial year 2001 enhanced to Rs. 2078.84 lacs at the end of financial year 2002-03. Out of 30 District Central Co-operative Banks of the State, 28 are not complying with the provisions of Section 11(1) of the Banking Regulation Act, 1947. A Bank categorized as weak according to Section 11 is not eligible for getting liberal refinance facility from the NABARD unless Govt. of India based on the performance grants relaxation. The Chhindwara bank has been classified as a weak bank from 31-3-1998. There is no relaxation available for the liberal credit from the NABARD to this bank therefore unless the bank increases its owned reserves and reduces NPAS it will not be able to serve many thousand member/farmer of primary agriculture cooperative societies affiliated to it. The Reserve Bank of India has also Issued show cause notice to the Central Cooperative Bank, Rewa, Shahdol and Raisen because of huge losses, why there banking licence be not cancelled. This show cause notice dated 5-10-2002 is on record as Annexure R-4. That in all the cases the Chairman has neither been removed, nor the Board has been superseded, but a corrective measure for improving financial condition of the Bank has been taken by way of temporary measure. As soon as the financial status improves and establises, the position shall be restored. The Board functioning under the Chairmanship of the petitioner could not Improve the financial condition of the Bank and petitioner could not give positive results since last many years. The District Collector being the Coordinator and Administrator of District machinery, it is expected that after implementation of the impugned order, the Collector shall take over as Chairman and financial condition of the Bank will be improved and the recovery of mounting dues shall be reduced.

6. To consider the rival contention of the parties the relevant provisions of the Act which are necessary to be referred are quoted hereunder :-

'12. Power to direct amendment of bye laws -

(1) Notwithstanding anything contained in this Act, or the rules or byelaws on the request of more than fifty per cent, of the member of the society or if the Registrar considers that an amendment of the bye-laws of society is necessary or desirable in the interest of such society, he may by an order in writing to be served on the society in the prescribed manner, require the society to make the amendment within sixty days.

(2) If the society falls to make the amendment within the time specified by the Registrar, the Registrar may after giving the society an opportunity of being heard and after soliciting the opinion of such Apex Federal society, as may be notified by the State Government, register such amendment and Issue a certified copy thereof to such society :

Provided that the provisions of this section shall not apply in the case of Urban Co-operative Banks.52. Power to appoint Government nominees-

(1) Where the State Government -

(a) has subscribed to the share capital of a society; or

(b) has assisted indirectly in the formation of augmentation of the share capital of a society as provided in Section 45; or

(c) has guaranteed the repayment of principal and payment of interest on debentures issued by a society, or

(d) has guaranteed the repayment of principal and payment of interest on loans and advances to a society; the State Government or any authority specified by the State Government in this behalf shall have the right to nominate such number of persons not exceeding (four)as it may deem fit on any or all of the committees of such society.

(2) A person nominated on the committee of a society under Sub-section (1) shall hold office for such period and on such conditions, as may be prescribed.

(3) Notwithstanding anything contained in this Act, every person nominated on the committee of a society under Sub-section (1) shall have one vote in such committee;

Provided that nominated person shall not be entitled to vote in any election of the office bearers of the committee of the society.

(4) When the Government has subscribed to the share capital of, or has guaranteed the repayment or principal and payment of interest on loans and advances to, a society to the extent of rupees three lakhs or more and the society has Incurred, loss to the extent of twenty five per cent, or more of its owned capital, the State Government may, notwithstanding anything contained in this Act, the rules made thereunder or bye-laws of the society, nominate one of the members nominated by it under Sub-section (1) as Chairman of the Committee of the Society and further appoint one of the nominated members as Managing Director/ General Manager /Manager of the Society.

53. Supersession of committee

(1) If, in the opinion of the Registrar, the committee, of any society -

(a) is negligent in the performance of the duties imposed on it by or under this Act or byelaws of the society or by any lawful order passed by the Registrar or is unwilling to perform such duties; or

(b) commit acts which are prejudicial to the interests of the society or its members, or

(c) violates the provisions of this Act or the rules made thereunder or byelaws of the society or any order passed by the Registrar; the Registrar may, by order in writing, remove the committee and appoint a person or persons to manage the affairs of the society for a specified period not exceeding two years in the first instance :

Provided that in case of a Co-operative Bank the order of suppression shall not be passed without previous consultation with the Reserve Bank :

Provided further that if no communication containing the views of the Reserve Bank of India, on action proposed is received within forty five days of the receipt by that Bank of the request soliciting consultation, it shall be presumed that the Reserve Bank of India agrees with the proposed action and the Registrar shall be free to pass such order as may be deemed fit:

Provided also that in case of a Co-operative bank, if so required by the Reserve Bank in the public interest or for preventing the affairs of the Co-operative Bank being conducted in a manner, detrimental to the interest of the depositors or for securing the proper management of a Co-operative Bank, the Registrar shall pass an order for the supersession of its committee or managing body by whatever name called and for appointment or an Administrator therefor for such period or periods not exceeding 5 years in the aggregate, as may from time to time be specified by the Reserve Bank and on' such appointment the provisions of sub-sections (4), (5), (6) and (8) shall apply as if orders were passed under Sub-section (1) :

Provided also that if a non-official is appointed in the committee of a primary society, he shall be from amongst the members of that society, entitled for such representation and in case of Central or Apex Society, if a person is appointed in the committee of such society, he shall be a member of one of its affiliated societies entitled for such presentation.

(2) No order under Sub-section (1) shall be passed unless a list of allegations, documents and witnesses in support of charges levelled against it has been provided and the committee has been given a reasonable opportunity of showing cause against the proposed order and representation, if any, made by it, is considered.

(3) The period specified in the order under Sub-section (1) may, at the discretion of the Registrar, be extended, from time to time:

Provided that no such order shall remain in force for more than three years in the aggregate.(4) The person or persons so appointed, shall subject to the control of the Registrar and to such instructions as he may, from time to time, give, have power to exercise all or any of the powers and to discharge all or any of the functions of the committee or of any officer of the society, and to take all such actions, as may be required in the interest of the society.

(5) The Registrar may fix the remuneration to the person or persons so appointed. The amount of such remuneration and other costs, if any, incurred in the management of the society shall be payable from its funds:

(6) The person or persons so appointed shall, before the expiry of the period of his or their appointment, arrange the constitution of a new committee in accordance with the bye-laws of the society.

(7) Before taking action under Sub-section (1) in respect of a financial Bank or in respect of a society indebted to a financing Bank, the Registrar shall consult, in the former case the Madhya Pradesh State Cooperative Bank Ltd. and, in the latter case, the financing bank concerned, regarding such action. If the Madhya Pradesh State Co-operative Bank Ltd. or the financing bank, as the case may be, fails to communicate its views within forty five days of the receipt by such bank of the request soliciting consultation, it shall be presumed that the Madhya Pradesh State Co-operative Bank Ltd. or the financing bank concerned, as the case may be, agreed with the proposed action.

(8) Notwithstanding anything contained in Sections 48, 49 and 50, if there is a difference of opinion between the general body of society and the person or persons appointed under Sub-section (1) in respect of any matter, it shall be referred to the Registrar for decision and his decision thereon shall be final :

Provided that if the Registrar fails to take any decision within three months of the general body meeting, the decision of the general body of the society shall prevail.(9) Nothing in this section shall be deemed to affect the power of the Registrar to direct the winding up of the society.

(10) During the period between the issuance of notice and the passing of an order removing the committee, the committee may be required by the Registrar to function under the supervision, and with the approval of such authority as the Registrar may specify in this behalf and no order made or resolution passed or any other act performed by the committee, shall be effectual unless it is approved by such specified authority : Provided where the Registrar, while proceeding to take action under Sub-section (2), is of the opinion that the suppression of the Committee during the period of proceeding is necessary in the interest of the society he may suspend the committee, which shall thereupon cease to function and make such arrangement as he thinks fit, of the affairs of the society till the proceedings are completed and order issued under Sub-section (1) ;

Provided further that the period of suspension shall not exceed six months and on the expiry of said period the suspension of the Committee shall stand revoked.

Provided also that, if the committee so suspended, is not superseded after undergoing the proceeding mentioned above, it shall be re-instated and the period during which it has remained suspended shall not count towards its term.

Provided also that no order of suspension shall be made unless the committee of the society has been given a reasonable opportunity of being heard.

(11) Notwithstanding anything contained, in this Act, the Registrar, shall in case of Central Co-operative Banks, Urban Co-operative Banks and Primary Co-operative Land Development Banks, if the recovery continuously in three co-operative years is less than 65 per cent of the demand or if the over dues exceed 35 per cent, pass an order for removal of the committee or the managing Committee by whatever name it is called of the Bank and for appointment of a administrator therefor for such period or periods not exceeding five years in the aggregate, as may be specified by the Registrar and on such appointment, the provisions of Sub-sections (4), (5) and (6) shall apply thereto as if an order was passed under Sub-section (1) :

Provided that no such order shall be made unless the committee has been given a reasonable opportunity of showing cause against the proposed order and representation if any, made by it is considered.(12) When a committee of a society has been superseded under Sub-section (1) any member of the committee, notwithstanding anything contained in this Act, rules made thereunder or byelaws of the society, shall not be eligible for contesting the election as a member of the committee nor he shall be eligible for co-option or nomination in that society for period of seven years :

Provided that nothing in this Sub-section shall apply to a member of the committee of a society who was not a party of such a decision of the committee which lead to the supersession of it.(13) Notwithstanding anything contained in this Act, or rules made thereunder or byelaws of society, if the committee of society ceases to function due to order of any Court or otherwise, the Registrar may appoint a person or committee of persons temporarily till the Court order is vacated or the new elections are held and the committee takes charge.

53-B Power of the Registrar to remove an Officer of an society in certain circumstances -

(1) If in the opinion of the Registrar, any officer of the co-operative society has been grossly negligent in the discharge of his duties imposed on him by or under this Act the rules made thereunder or byelaws or has by a fraudulent act, caused financial loss to the society the Registrar may without prejudice to any other action that may or can be taken against him, call upon the society to remove within a specified period such officer from the office held by him and where necessary also to disqualify him from holding any office under that society for a period not exceeding three years, whereupon the society shall, after affording opportunity to the officer concerned of being heard, pass such orders as it deems fit.

(2) On the failure of the society to take action under Sub-section (1), the Registrar may after affording opportunity to the officer of being heard and for reasons to be recorded, and communicated to the officer and the society concerned, remove or removed and disqualify for a period not exceeding three years, the officer from holding any office under that society for the period specified in the order.

(3) An officer removed under the Sub-section (1) or Sub-section (2) shall with effect from the date of communication of the order, cease to hold that office and if disqualified shall not be eligible to hold any office under that society for the period specified in the order.

Rule 53 of M.P. Co-operative Societies Rules, 1962 reads as under :-

53. Appointment of Registrar's nominee or board or nominees -

(1) The Registrar may, by general or special order, appoint any person to be his nominee for deciding disputes arising in any society or class of societies within such area and for such period as may be specified in the order.

(2) The Registrar may by order appoint a board of nominees consisting of two or more nominees for deciding disputes arising in any society or class of societies within such area and for such period as may be specified in the order.

(3) Where a board of nominee is appointed under Sub-section (2), one of the nominees on the board shall be appointed by the Registrar to be the Chairman of the Board, who shall fix the date, time and place of hearing disputes referred to the board and issue notices in connection with the disposal of such disputes.

(4) Save where it has been otherwise provided in the Act, in deciding the disputes where there is no unanimous decision, the opinion of the majority shall prevail. Where opinion of the nominees on the board is equally devided, the opinion of the Chairman of the board shall prevail.'

7. It is not in dispute that :- (a) the State Government has subscribed share capital of the co-operative society, (b) that the State Government has right to nominate up to four members in any or all of the committees of the society, (c) that a person nominated under Sub-section (1) of Section 52 can be nominated as Chairman of the committee by the State Government. The aforesaid powers are vested with the State Government and are not challenged in this petition. Main contention in these petitions are :- (A) that the Collector was not nominated under Sub-section (1) of Section 52 of the Act, (B) until and unless elected Chairman of the Co-operative Society is removed by the State Government, the State Government is not empowered to nominate a nominee member under Sub-section (1) as Chairman of the society, (C) that the principles of natural justice, has been violated.

To consider first contention and its reply that the State Government by issuing Annexure R-1 notification under Sub-section (1) of Section 52, delegated powers to as many as five authorities to invoke such powers. Firstly, it may be seen whether the Collector who is nominee member of the society may be treated as a nominee member under Sub-section (1) of Section 52. Under Sub-section (1) of Section 52 the State Government has authorised five officers to invoke the power to nominate such members as they may deem fit for the society. The Registrar, Co-operative Society issued an order under Section 12 of the Act, by which it has been directed to amend the byelaws and to nominate under the byelaws 3 or 4 persons as the case may be, as Government nominee members. Section 12 of the Act specifically empowers the Registrar to issue order directing any Co-operative society in a prescribed manner, requiring the society to make the amendment in the bye-laws within a period of sixty days from the date of the order. If the society fails to make the amendment within the time specified by the Registrar, the Registrar, may after affording the society an opportunity of being heard and after soliciting the opinion of such Apex Federal society, as may be notified by the State Government, register such amendment and issue a certified copy thereof to such society. The aforesaid powers may be exercised by the Registrar or the Registrar has power to direct any society to amend byelaws. It is not in dispute that such power was exercised by the Registrar and the Society in question in compliance of orders of Registrar amended the byelaws and as per model byelaws, following amendment was included in the byelaws of every co-operative society :- 'Nominated by the State :-

(1) The Collector, Chhindwara or any other officer nominated by him, who is not below the rank of Deputy Collector or Project Officer of any scheme in force in the District.

(2) Deputy Director, Agriculture.

(3) Deputy Registrar, Co-operative Society.

It is also provided that the aforesaid ex officio directors shall not have any right to vote in the election.'

8. To consider the question whether the aforesaid nomination is under Section 52 or not, following facts may be seen. Under Sub-section (1) of Section 52 it is specifically provided that the State Government or any authority specified by the State Government in this behalf shall have right to nominate such numbers of persons not exceeding four as it may deem fit of any or all of the committees of such society. Sub-section (2) of Section 52 also provides that a person nominated on the committee of a society under Sub-section (1) shall hold office for such period and on such conditions as may be prescribed. Sub-section (4) of Section 52 provides that the State Government may nominate one of the members nominated by it under Sub-section (1) as Chairman of the Committee of the Society. Aforesaid all the three provisions if read together, the natural interpretation which may be arrived is that it requires a specific nomination either by the State Government or by any authority specified by the State Government. Thus a specific nomination under Sub-section (1) of Section 52, is the requirement. If aforesaid provision is implemented under the byelaws without specifying it by the Registrar or by any authority specified by the State Government, then it will not be a nomination under Section 52(1). Apart from this if the order Annexure R-2 is seen, nowhere it provides that the aforesaid nomination is for the purpose of Sub-section (1) of Section 52. Sub-section (2) of Section 52 provides that the nomination shall be for such period and on such condition as may be prescribed, but the aforesaid requirement does not find place in order of Registrar directing amendment of byelaws Annexure R-2 or in the nomination Annexure R3. Under Sub-section (1) of Section 52 the powers of State Government may be delegated to the authority specified by the State Government, but the aforesaid byelaws provide that the Collector may also nominate any other person not below the rank of Deputy Collector or Project Officer of any project prevailing in the District. A delegatee of the State cannot again delegate his authority to some other person. The nomination must be specific under sub-sections (1) and (2) of Section 52. The powers are vested to the State Government to safeguard its interest, where conditions enumerated in clauses (a), (b), (c) and (d) of Sub-section (1) of Section 52 are in existence and not in the case of each and every society, as directed by the Registrar, by orders Annexure R2 and Annexure R3. Issuing orders to amend bylaws under Section 12 is entirely different statutory act, while the nomination under Sub-section (1) of Section 52 is a different act. The authority may be the same for the purpose of nomination, but the orders are required under the specific section. The authority ought to have invoked specific power for specific purposes under the act for the nomination. The nomination has to be made in accordance with the provisions of Section 52(1) and (2) and the aforesaid powers cannot be exercised by invoking powers under Section 12 of the Act. Both are different and distinct powers and are to be invoked in different situations. Though the Registrar is having power under Section 12 to issue directions to the Co-operative Societies to nominate director, to the Collector or his nominee, or any other Government officer and if a cooperative society has followed the aforesaid directions or has made a provision in the byelaws to nominate the Collector or Deputy Collector as the case may be as Director of Bank, the net result of the Collector is a nominee under the byelaws in compliance of the order issued by the Registrar under Section 12 of the Act and not under Sub-section (1) of Section 52. There maybe societies in which the State Government has not subscribed share capital or has not assisted funds in the formation or augmentation of the share capital of a society or has not guaranteed the repayment of principal and payment of interest on debentures issued by a society or may not have guaranteed the repayment of principal and payment of interest on loans and advances to a society. In those societies no person can be nominated as member of the committee under Sub-section (1) of Section 52. Section 52(1) enumerates circumstances in which a person may be nominated by the State Government or by the authority specified by the State Government. Until and unless aforesaid circumstances exist there is no need to nominate a person under Sub-section (1) of Section 52. Apart from this the law has provided discretion to the State Government or the authorities specified to nominate such persons for such a period and for such condition as may be prescribed necessary. But, such circumstances may not exist in every society. While under Section 12 no such conditions are necessary in respect of any of the Cooperative Societies of the State.

9. The order Annexure R-2 issued on 9-2-1989 under Sub-section (2) of Section 12 provides that because of some amendment it became necessary to amend byelaws, and proposed amendment was circulated for inviting objections. These amendments are in general. While no objection can be invited towards nomination under Section 52 (1) of the Act. Though the order Annexure R-2 relates to District Cooperative Central Bank Ltd., Chhindwara, but it is stated that similar directions were issued to all the societies of the State. The nomination of Collector and other officers are shown as 'nominees of the State', but nowhere in the byelaws it is provided that these nominees are under Section 52 (1) of the Act. For the sake of arguments if it is presumed that aforesaid nomination is under Section 52 (1) of the Act, even then the requirements envisaged under Section 52 (1) does not fulfil. The provision specifically provides certain circumstances in which the State Government may nominate up to four persons. The entire idea behind nomination under Sub-section (1) is that the Government may nominate even individual or officials as it may deem fit on any or all of the committees of the society. But incorporation of aforesaid, if presumed under Sub-section (1) of Section 52, will defeat the entire purpose of nomination under Sub-section (1). The inclusion of nomination in byelaws will also defeat the provision of Sub-section (2) of Section 52, where it is provided that a nominated person shall hold office for such period and on condition as may be prescribed. The aforesaid nomination also provides that the nominated member shall have no right to cast the vote. This is again contrary to the provision of Sub-section (3) of Section 52. Sub-section (3) provides that every person nominated on the committee of society shall have one vote in the said committee, but that nominated person shall not be entitled to vote in any election of office bearer of the committee of society. By such nomination by byelaws, the right under Sub-section (3) has been curtailed which cannot be restrained in such manner by Joint Registrar directing Bank to amend byelaws under Section 12. The Joint Registrar is a deligatee of powers under Sub-section (1) of Section 52. He cannot do so without getting such authority from the State. All the aforesaid circumstances show that the aforesaid nomination under the byelaws is an exercise of powers under Section 12 of the Act, which provides powers to the Registrar to direct amendment of byelaws, but it cannot be said that by such order, powers under Sub-section (1) of Section 52 were exercised.

10. In view of the aforesaid discussion, I find that the order Annexure R-2 and R-3 does not confirm the requirement of Sub-sections (1), (2) and (3) of Section 52 and nomination of byelaws cannot be deemed or presumed that the nomination is under Sub-section (1) of Section 52.

11. It is not in dispute that the condition enumerated in Clauses (a), (b), (c) and (d) of Sub-section (1) of Section 52 are existing in all the societies in question. The State Government is empowered to appoint any of the nominated members to nominate as Chairman of the committee of society. The aforesaid powers may be exercised when there is a specific nomination under Sub-section (1) of Section 52 in respect of society. But as stated hereinabove, the nomination of Collector by orders Annexure R-2 and Annexure R-3 through the byelaws is not a nomination under Sub-section (1) of Section 52. In these circumstances, the Collector cannot be nominated as Chairman under Section 52 (4).

12. Now the important question whether by the impugned order petitioner has been removed from the office of Chairman or he has been bypassed or kept in curtain for the time being, till the impugned order remains in force, may be seen. As the learned Advocate General during the course of arguments explained that the petitioners shall remain as Chairman, but for the time being they will remain behind the curtain and the entire function of the Bank shall be managed by the nominated Chairman. Whether such course is available under Sub-section (4) of the Act that, without removal of elected Chairman another Chairman may be nominated and the existing Chairman shall remain behind the curtain or vacancy of the office of Chairman is necessary for the nomination of Chairman under Sub-section (4)?

13. To appreciate this question, it is necessary to look into the incorporation of Sub-section (4) of Section 52 in the statute book. By 1976 amendment, Section 52 was amended by inserting Sub-section (4). Another amendment in the Act is incorporation of Section 53-B, empowering the Registrar to remove an officer of; the society in certain circumstances. Section 53-B -provides a complete procedure in itself, empowering Registrar to remove an office bearer of the society which includes Chairman of the society. For the first time these two provisions were incorporated in the Act. Section 53-B as quoted hereinabove provides that, if in the opinion of Registrar any officer of cooperative society has been1 grossly negligent in the discharge of his duties imposed on him by or under this Act; the rules made thereunder or byelaws or has, by a fraudulent act, caused financial loss; to the society the Registrar may without prejudice to any other action that may or can be taken against him, call upon the society to remove within a specified period such officer from the office held by him and where necessary also to disqualify him from holding any office under that society for a period not exceeding three years. On receiving this direction the society shall after Affording opportunity to the officer concerned of being heard, pass such orders as it deems fit. If the society does not take any action under Sub-section (1), the Registrar may after affording opportunity to the officer of being heard and for reasons to be recorded, and communicated to the officer and the society concerned, remove or removed and disqualify the officer for a period not exceeding three years. This provision was incorporated for the first time on 15th March 1976. Before this, the powers were exercisable under Section 53 of the Act. Section 53-B though provides for removal, but does not provide any power for filling-up of vacancy so occurred by removal. It appears that in peculiar circumstances, the power under Sub-section (4) of Section 52 was envisaged in respect of special category of societies by nominating Chairman of the society. But the fact remains that until and unless any office is vacant, whether any other person may be nominated as Chairman? Though this question has been tried to be explained by learned Advocate General, but unsatisfactorily. How the State Government may nominate a Chairman for the society, whereas another elected person is already functioning and that too without his removal? Section 52 is silent in respect of removal of existing/elected Chairman. Then a harmonious consideration is to be given to the provision. Until and unless said office is vacant, the power under Section 52 (4) cannot be invoked. The State Government to take care of the situation, when the office is vacant or new election cannot be held forthwith, may nominate any person, so nominated under Sub-section (1) of Section 52 as Chairman of the society, so that the society may continue to function. But in no case, when a Chairman is functioning or holding the office without his removal from the office, another person can be nominated. It cannot be said that the said person shall go behind the curtain and nominated Chairman shall work and discharge the function. All this cannot be done, until there is specific provision in this regard. Therefore the argument of learned Advocate General has no legs to stand. Even for the moment if it is assumed that the State Government has power to nominate a person under Sub-section (4) of Section 52 and by invoking of aforesaid provision shall have effect of removal of elected Chairman, then in a democratic process the elected person who is holding the office by virtue of election under the statute requires one opportunity of hearing, or even of show cause before his removal. Elected person of any statutory body cannot be thrown in the like manner. He must get opportunity to explain the circumstances against him before his removal. He enjoys a elected office of reputation with responsibility. He holds the office after election from the members of the society, may be shareholders and/or borrowing members. But when the members of the society or general body of members, in whom the final authority in the society is vested, has shown its confidence in a member by electing him Chairman of the society, he cannot be removed from the office, without affording him proper opportunity. The principle of natural justice requires that a person who is removed from the office should know what is the cause or his act in this regard, resulting in his removal. He may show that he is not at all at fault and after his election the society has infact not suffered any loss or has earned profit, then the authority competent for removal shall consider his reply and if the authority is satisfied with the reply of elected Chairman, then the authority shall consider for his continuance in the office. Though the petitioner in some of the cases has tried to convince this Court that in past the Collector of District was officiating as Chairman and in his tenure the society had suffered loss, but at present there is no specific datas available in this regard and I am not inclined to decide this issue at this juncture without full facts. But the fact remains that before passing the impugned order, the State Government has not issued any show cause notice or afforded opportunity of hearing to the elected Chairman of society.

14. The Apex Court in State of Mysore v. Allum Karibasappa, AIR 1974 SC 1863 considering similar circumstances held thus (Paras 16 to 19) :

'In the present case, the impeached orders suffer from two insurmountable infirmities. One is that the entire committee of Management has been superseded. There is a provision under Section 30 of the Act to supersede the management. The State Government does not take recourse to the section. Indirectly the State Government has overthrown the Committee of Management including the President and the Vice-President. The President and the Vice-President are officers within the meaning of Section 2 (g) of the Act. Section 54 does not confer any power to remove the President and the Vice-President of the Society. Section 54 contemplates exercise of control over the conduct of the business. The word 'control' suggests check, restraint or influence. Control is intended to regulate and hold in check and restrain from action. In the guise of exercising control the State has displaced the committee of Management and substituted its own Committee. The State has indirectly intended to achieve what it is directly prohibited from doing under Section 54 of the Act.

The second vice of the notification is that it is in violation of principles of natural justice. Section 30 of the Act contemplates a notice where the State intends to supersede the Management. The Committee has been deprived of their right to manage the affairs of the Society. They have been deprived of the right arbitrarily and in utter defiance of the powers under the statute.

The High Court rightly set aside the impeached notifications.'

The Apex Court in S.L. Kapoor v. Jagmohan, (1980) 4 SCC 379 : AIR 1981 SC 136 held thus (Para 24) :-

The matter has also been treated as an application of the general principle that justice should not only be done but should be seen to be done. Jackson's Natural Justice (1980 Edn.) contains a very interesting discussion of the subject. He says :

The distinction between justice being done and being seen to be done has been emphasised in many cases............

The requirement that justice should be seen to be done may be regarded as a general principle which in some cases can be satisfied only by the observance of the rules of natural justice or as itself forming one of those rules. Both explanations of the significance of the maxim are found in Lord Widgery C.J.'s judgment in R. v. Home Secretary, ex. p. Hosenball, 1977 (1) WLR 766 where after saying that 'the principles of natural justice are those fundamental rules, the breach of which will prevent justice from being seen to be done' he went on to describe the maxim as 'one of the rules generally accepted in the bundle of the rules making up natural justice'.

It is the recognition of the importance of the requirement that justice is seen to be done that justifies the giving of a remedy to a litigant every when it may be claimed that a decision alleged to be vitiated by a breach of natural justice would still have been reached had a fair hearing been given by an impartial tribunal. The maxim is applicable precisely when the Court is concerned not with a case of actual injustice but with the appearance of injustice or possible injustice. In Altco Ltd. v. Sutherland Donaldson, 1971 (2) Lloyds Rep 515, said that the Court, in deciding whether to interfere where an arbitrator had not given a party a full hearing was not concerned with whether a further hearing would produce a different or the same result. It was important that the parties should not only be given justice, but, as reasonable men, know that they had justice or 'to use the time hallowed phrase' that justice should not only be done but be seen to be done. In R. v. Thames Magistrates Court, ex.p. Polemis, 1974 (1) WLR 1371, the applicant obtained an order of certiorari to quash his conviction by a stipendiary magistrate on the ground that he had not had sufficient time to prepare his defence. The Divisional Court rejected the argument that, in its discretion, it ought to refuse relief because the applicant had no defence to the charge.

It is again absolutely basic to our system that justice' must not only be done but must manifestly be seen to be done. If justice was so clearly not seen to be done, as on the afternoon in question here, it seems to me that it is no answer to the applicant to say : Well, even if the case had been properly conducted, the result would have been the same'. That is mixing up doing justice with seeing that justice is done (per Lord Widgery C.J. at Page 1375).

In our view the principles of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary. It ill comes from a person who has denied justice that the person who has been denied justice is not prejudiced. As we said earlier where on the admitted or indisputable facts only one conclusion is possible and under the law only one penalty is permissible, the Court may not issue its writ to compel the observance of natural justice, not because it is not necessary to observe natural justice but because Courts do not issue futile writs. We do not agree with the contrary view taken by the Delhi High Court in the judgment under appeal.'

In Dr. Rash Lal Yadav v. State of Bihar, (1994) 5 SCC 267 : 1994 AIR SCW 3329. Apex Court considering the applicability of natural justice and fairness in action held in absence of contrary indication in statute, procedural fairness is an implied mandatory requirement to protect arbitrary action where statute confers wide power coupled with wide discretion on the authority. The Apex Court held thus (Para 6) :-

The concept of natural justice is not a static one but is an ever expanding concept. In the initial stages it was thought that it had only two elements, namely, (i) no one shall be a judge in his own cause and (ii) no one shall be condemned unheard. With the passage of time a third element was introduced, namely, of procedural reasonableness because the main objective of the requirement of rule of natural justice is to promote justice and prevent its miscarriage. Therefore, when the legislature confers power in the State Government to be exercised in certain circumstances or eventualities, it would be right to presume that the legislature intends that the said power be exercised in the manner envisaged by the statute. If the statute confers drastic powers it goes without saying that such powers must be exercised in a proper and fair manner. Drastic substantive laws can be suffered only if there are fairly and reasonably applied. In order to ensure fair and reasonable application of such laws Courts have, over a period of time, devised rules of fair procedure to avoid arbitrary exercise of such powers. True it is, the rules of natural justice operate as checks on the freedom of administrative action and often prove time consuming but that is the price one has to pay to ensure fairness in administrative action. And this fairness can be ensured by adherence to the expanded notion of rule of natural justice. Therefore, where a statute confers wide powers on an administrative authority coupled with wide discretion, the possibility of its arbitrary use can be controlled or checked by insisting on their being exercised in a manner which can be said to be procedurally fair. Rules of natural justice are, therefore, devised for ensuring fairness and promoting satisfactory decision-making. Where the statute is silent and a contrary intention cannot be implied the requirement of the applicability of the rule of natural justice is read into it to ensure fairness and to protect the action from the charge of arbitrariness. Natural justice has thus secured a foothold to supplement enacted law by operating as an implied mandatory requirement thereby protecting it from the vice of arbitrariness. Courts presume this requirement in all its width as implied unless the enactment supplies indications to the contrary as in the present case. This Court in A.K. Kraipak v. Union of India, AIR 1970 SC 150 (at p. 156) after referring to the observations in State of Orissa v. Dr. (Miss) Binapani Dei, AIR 1967 SC 1269 observed as under (SCC p. 272, Para 20) :

'The aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. In other words they do not supplant the law of the land but supplement it.'These observations make it clear that if the statute, expressly or by necessary implication omits the application of the rule of natural justice, the statute will not be invalidated for this omission on the ground of arbitrariness.

What emerges from the above discussion is that unless the law expressly or by necessary implication excludes the application of the rule of natural justice, Courts will read the said requirement in enactments that are silent and insist on its application even in cases of administrative action having civil consequences. However, in this case, the High Court has, having regard to the legislative history, concluded that the deliberate omission of the proviso that existed in Sub-section (7) of Section 10 of the Ordinance (1980) while re-enacting the said Sub-section in the Act, unmistakably reveals the legislature's intendment to exclude the rule of giving an opportunity to be heard before the exercise of power of removal. The legislative history leaves nothing to doubt that the legislature did not expect the State Government to seek the incumbent's explanation before exercising the power of removal under the said provision. We are in complete agreement with the High Court's view in this behalf.

The Apex Court in State of Maharashtra v. The Jalgaon Municipal Council, AIR 2003 SC 1659 considering the fundamental principle of fair hearing incorporated in the doctrine of natural justice and as a rule of universal obligation that all administrative acts or decisions affecting rights of individuals must comply with the principles of natural justice and the person or persons sought to be affected adversely must be afforded not only an opportunity of hearing but a fair opportunity of hearing. The Court held thus (Paras 30, 31 and 32) :

'It is a fundamental principle of fair hearing incorporated in the doctrine of natural justice and as a rule of universal obligation that all administrative acts or decisions affecting rights of individuals must comply with the principles of natural justice and the person or persons sought to be affected adversely must be afforded not only an opportunity of hearing but a fair opportunity of hearing. The State must act fairly just the same as anyone else legitimately expected to do and where the State action fails to satisfy the test it is liable to be struck down by the Courts in exercise of their judicial review jurisdiction. However, warns Prof. H.W.R. Wade that the principle in flexible. 'The judges, anxious as always to preserve some freedom of manoeuvre, emphasise that 'it is not possible to lay down rigid rules as to when the principles of natural justice are to apply; nor as to their scope and extent'. Their application, resting as it does upon statutory implication, must always be in conformity with the scheme of the Act and with the subject-matter of the case. 'In the application of the concept of fair play there must be real flexibility'. There must also have been some real prejudice to the complainant : there is no such thing as a merely technical infringement of natural justice' (Administrative Laws, Wade and Forsyth, Eighth Edition, 2000, pp. 491-492).The learned authors quote from two authorities in support of preserving flexibility. In Russell v. Duke of Norfolk (1949) 1 All ER 109, 118, Tucker, LJ opined, 'the requirement of natural justice must depend on the circumstances of the case, the nature of the enquiry, the rules under; which the Tribunal is acting, the subject-matter to be dealt with, and so forth'. In Llovd v. McMahon, (1987) AC 625, 702, Lord Bridge stated in his speech, 'the so-called rules of natural justice are not engraved on tablets of stone. To use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and statutory or other frame work In which it operates. In particular, it is well-established that when a institute has conferred on any body the power to make decisions affecting individuals, the Courts will not only require the procedure prescribed by the statute to be followed, but will readily imply so much and no more to be introduced by way of additional procedure safeguards as will ensure the attainment of fairness.' (Administrative Law, ibid, at p. 493).

The caution of associating rules of natural justice with the flavour of flexibilities would not permit the Courts applying different standards of procedural justice in different cases depending on the whims or personal philosophy of the decision maker. The basic principles remain the same; they are to be moulded in their application to suit the peculiar situations of a given case, for the variety 'and complexity of situations defies narration. That is flexibility. Some of the relevant factors which enter the judicial process of thinking for determining the extent of moulding the nature and scope of fair hearing and may reach to the extent of right to hearing being excluded are : (i) the nature of the subject-matter, and (ii) exceptional situations. Such exceptionality may be spelled out by (i) need to take urgent action for safeguarding public health or safety or public interest, (ii) the absence of legitimate exceptions (iii) by refusal of remedies in discretion, (iv) doctrine of pleasure such as the power to dismiss an employee at pleasure (v) express legislation. There is also a situation which Prof. Wade and Forsyth terms as 'dubious doctrine' that right to a fair hearing may stand excluded where the Court forms an opinion that a hearing would make no difference. Utter caution is heeded before bringing the last exception into play. (Administrative Law, ibid at pp. 543-544).'

15. The learned Advocate General has relied on various judgments of Apex Court for the proposition that looking to the peculiar facts of present case principles of natural justice are not applicable. In this regard he has placed reliance to the following decisions :

1. R.S. Dass v. Union of India, 1986 Supp SCC 617 : AIR 1987 SC 593.

2. Union of India v. Tulsiram Patel, (1985) 3 SCC 398 : AIR 1985 SC 1416.

3. S.N. Mukherjee v. Union of India, (1990) 4 SCC 594 : AIR 1990 SC 1984.

4. State of Punjab v. Mahajan Sabha, Gurdaspur, (1996) 1 SCC 538 : AIR 1996 SC 2153.

5. Dr. Umrao Singh Choudhary v. State of M.P., (1994) 4 SCC 328.

6. Commissioner of Income-tax, New Delhi (Now Rajasthan) v. East West Import and Export (P) Ltd. (Now known as Asian Distributors Ltd.) Jaipur (1989) 1 SCC 760 : AIR 1989 SC 836.

7. Oriental Insurance Co. Ltd. v. Hansrajbhai V. Kodala, (2001) 5 SCC 175 : AIR 2001 SC 1832.

8. Afzal Ullah v. State of U.P., AIR 1964 SC 264.

9. Dynamatic Hydraulics Ltd. v. Collector of Customs, New Customs House, Bombay, (1991) 4 SCC 251.

10. Assistant Commissioner of Commercial Taxes (Asst.) Dharwar v. Dharmendra Trading Company, (1988) 3 SCC 570 : AIR 1988 SC 1247.

The Apex Court in R.S. Dass, AIR 1987 SC 593 (supra) considering the applicability of natural justice held (Para 25) :

'It is well established that rules of natural justice are not rigid rules, they are flexible and their application depends upon the setting and the background of statutory provision, nature of the right which may be affected and the consequences which may entail, its application depends upon the facts and circumstances of each case. These principles do not apply to all cases and situation. Applications of these uncodified rules are often excluded by express provision or by implication. In Union of India v. Tulsiram Patel, (1985) 3 SCC 398 : AIR 1985 SC 1416 (Para 101), Constitutional Bench of this Court considered the scope and extent of applicability of principles of natural justice to administrative actions. Madon, J. summarised the position of law on this point and observed as follows : (SCC p. 479, SCC (L&S;) p. 753, Para 101).

So far as the audi alteram partem rule is concerned, both in England and in India, it is well established that where a right to a prior notice and an opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. This right can also be excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its exclusion; nor can the audi alteram partem rule be invoked if importing it would have the effect of paralysing the administrative process or where the need for promptitude or the urgency of taking action so demands, as pointed out in Maneka Gandhi case, AIR 1978 SC 597.

In the instant cases statutory regulations do not expressly or by implication apply the rule of audi alteram partem in making the selection. On the other hand the scheme contained under the regulations excluded the applicability of aforesaid rule by implication. Select List is prepared each year which ordinarily continues to be effective for a year or till the fresh Select List is prepared. If during the process of selection a senior officer is proposed to be superseded by virtue of not being included in the Select List, and if opportunity is afforded to him to make representation and only thereafter the list is finalised, the process would be cumbersome and, time consuming. In this process it will be difficult for the Committee to prepare and finalise the Select List within a reasonable period of time and the very purpose of preparing the Select List would be defeated. Scheme of the Regulations therefore clearly warrants exclusion of principle of audi alteram partem. No vested legal right of a member of the State Civil Service who after being considered, is not included in the Select List, is adversely affected. Non-inclusion in the Select List does not take away any right of a member of the State Civil Service that may have accrued to him as a Government servant : therefore no opportunity is necessary to be afforded to him for making representation against the proposed supersession.'

The Apex Court in S.N. Mukherjee's case, AIR 1990 SC 1984 (supra) held thus (Para 38) :

'The object underlying the rules of natural justice 'is to prevent miscarriage of justice' and secure 'fair play in action'. As pointed out earlier the requirement about recording of reasons for its decision by an administrative authority exercising quasi-judicial functions achieves this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decision-making. Keeping in view the expanding horizon of the principles of natural justice, we are of the opinion that the requirement to record reasons can be regarded as one of the principles of natural justice which govern exercise of power by administrative authorities. The rules of natural justice are not embodied rules. The extent of their application depends upon the particular statutory framework whereunder jurisdiction has been conferred on the administrative authority. With regard to the exercise of a particular power by an administrative authority including exercise of judicial or quasi-judicial functions the legislature, while conferring the said power, may feel that it would not be in larger public interest that the reasons for the order passed by the administrative authority be recorded in the order and be communicated to the aggrieved party and it. may dispense with such a requirement. It may do so by making an express provision to that effect as those contained in the Administrative Procedure Act, 1946 of USA and the Administrative Decisions (Judicial Review) Act, 1977 of Australia whereby the orders passed by certain specified authorities are excluded from the ambit of the enactment. Such an exclusion can also arise by necessary implication from the nature of the subject-matter, the scheme and the provisions of the enactment. The public interest underlying such a provision would outweigh the salutary purpose served by the requirement to record the reasons. The said requirement cannot, therefore, be insisted upon in such a case.'

In Hari Pada Khan (AIR 1996 SC 1065) (supra) the Apex Court held thus (para 5):

'The doctrine of principle of natural justice has no application when the authority concerned is of the opinion that it would be inexpedient to hold an enquiry and that it would be against the interest of security of the Corporation to continue in employment of the offender-workman when serious acts are likely to affect the foundation of the institution. In Union of India v. Tulsiram Patel (1985) 3 SCC 398 : (AIR 1985 SC 1416) a Constitutional Bench of this Court upheld the validity of the similar provisions under Article 311 of the Constitution. Recently, in SLP (C), No. 11659 of 1992 the matter had come up before this Court on 13-11-1995, where the validity of a pari materia provision was questioned. This Court upheld the validity stating that the above clause will operate prospectively.'

Relying on aforesaid, learned Advocate General contended that in the present case condition enumerated in clauses (a) to (d) of Sub-section (1) of Section 52 are existing. The Collector being a nominee of State under Sub-section (1) has been nominated as Chairman of the Bank, because of the huge loss in the Bank. To protect public money this decision has been taken which is in the larger public interest. In these circumstances, the principle of natural justice has been rightly not observed by the State Government. The procedure may take its own time and the loss will further accumulate and it is the public who will suffer. By necessary implication under Sub-section (4) of Section 52 principles of natural justice has been excluded.

17. To appreciate the contention of learned Advocate General in the light of judgments referred by him and also the Judgments referred by learned counsel for petitioners following factual position emerges. The Bank is running in accumulated loss since last several years. It is not the case of State that within a short span of period the Bank has suffered huge loss or because of some act of the petitioners the money was drained out. The allegations in the petitions are that because of schemes of Central and State, which are being implemented through banks the loss has occurred. In some of the cases, it is the contention of the petitioners that after their election the loss has been reduced. In some of the cases it is the contention of the petitioners that they are elected just one or two years back and in past the Collector was officiating as the Chairman of the Bank and there is no fault on the part of petitioners in respect of accumulation of alleged loss. It is also not in dispute that before two or three years of filing of petitions, petitioners were elected as Chairman by the general body. They are elected persons and enjoy an office of reputation in democratic process. The shareholders or borrowing members have shown their confidence in the petitioners. The petitioners are also responsible to the general body in this regard. If the State Government decides to take some action against the petitioners, then issuing show cause notice and affording opportunity of hearing to the petitioners will not be prejudicial to the interest of bank or public exchequer. If the petitioners are permitted to continue for a short period during the pendency of aforesaid proceedings with some restrictions, it may not affect in any manner the accumulation of loss. But fact remains that the elected persons have been indirectly removed and the Collector of concerned District has been nominated as Chairman. The Collector is nominated Director of the Bank under the bye-laws. He owes duty to inform the State Government in respect of causes of loss or any reformatory measures to be taken. The loss has accumulated in the couple of years and not within the short period. What action these authorities have taken in past is not on record. The State has not placed any material in this regard, except that a committee was constituted in the Chairmanship of Shri A. V. Singh, who submitted some report long back in the year 2001. That report is also not placed on record. What transpired after 2001 is not on record. No report of so called official directors of the bank has been placed on record showing that because of present management the Bank has suffered loss or they protested at any point of time in respect of some action of petitioners, resulting loss to the Bank. In absence of any material before this Court even in the writ petitions, the action of State enforcing powers under Sub-section (4) of Section 52 without applying principles of natural justice cannot be said to be a fair play, fair action or transparent action. There may be circumstances, in which the principles of natural justice may be excluded, but no such circumstances are placed on record, in which the State Government has acted without issuing show cause notice or affording opportunity of hearing. In the facts and circumstances of the case, it is not a case wherein such requirement may be waived or excluded. The petitioners may be held responsible for such loss or any action may be taken against them, if the State Government arrives at a finding that because of some mis-management or mis-conduct on the part of petitioners the Bank has suffered loss. There is also no explanation on the part of State that without removing the petitioners from the Chairmanship of Bank, such course is available to the State by nominating Collector as Chairman.

16. In view of the aforesaid, the contention of respondent cannot be accepted that by necessary implications principles of natural justice are excluded or without removing the petitioners from the post of Chairman, the Collector may be nominated. Principles of natural justice ought to have been followed by the respondents, before passing impugned order.

17. In view of aforesaid discussion, it is held that the nomination of Collector under the bye-laws is not in accordance with the provision of Sub-section (1) of Section 52 and without removal of petitioners from the office of Chairman or till the office of Chairman is vacant, powers under Sub-section (4) of Section 52 cannot be exercised.

18. Consequently, these petitions are allowed. The impugned order, by which the State Government has nominated Chairman, is hereby quashed. Petitioners are entitled to costs, quantified Rs. 1,000/- in each case.