| SooperKanoon Citation | sooperkanoon.com/849552 |
| Subject | Trusts and Societies |
| Court | Patna High Court |
| Decided On | May-11-2009 |
| Case Number | CWJC No. 18290 of 2008 |
| Judge | Ramesh Kumar Datta, J. |
| Acts | Bihar Co-operative Societies Act, 1935 - Sections 14(1), 14(3), 35, 40(3), 41, 41(1) and 61(1); ;Bihar Co-operative Societies Rules, 1959 - Rules 20(3), 28 and 55; ;Constitution of India - Article 311 (2) |
| Appellant | Dr. Sunil Kumar Singh Son of Sri Maharana Pratap Singh, Chairman, Bihar State Co-operative Marketing |
| Respondent | The State of Bihar Through Its Secretary, Co-operative Department and ors.;The State of Bihar Throug |
| Appellant Advocate | Y.V. Giri, Sr. Adv.,; Ishwari Singh,; Kiran Kumari,; |
| Respondent Advocate | P.K. Shahi,; Vikas Kumar, AC to Adv. Generals for State,; |
| Disposition | Application dismissed |
| Cases Referred | Calvin v. Carr |
Ramesh Kumar Datta, J.
1. Both the writ applications raise common issues pertaining to the suspension of the Managing Committee/Board of Directors of the Bihar State Co-operative Marketing Union Ltd. (BISCOMAUN) by order dated 12.1.2009 passed by the Registrar, Co-operative Societies, Bihar and accordingly they have been heard together and are being disposed of by this common order.
2. The petitioners seek quashing of the aforesaid order dated 12.1.2009 by which the Managing Committee/Board of Directors of BISCOMAUN has been suspended for a period of six months by the Registrar, Co-operative Societies, Bihar in exercise of the powers under Section 41(1) of the Bihar Co-operative Societies Act, 1935 and the District Magistrate, Patna has been appointed as the Special Officer for carrying on the functions of the Board of Directors.
3. The facts of the case lie in a narrow compass. On 16.10.2008, the intervenor, respondent No. 8, Vishal Singh, a representative of the BISCOMAUN from Udwant Nagar Vyapar Mandal, Ara filed a petition before the Registrar, Co-operative Societies, respondent No. 3 making allegations under 14 heads against the Board of Directors of BISCOMAUN and its Chairman alleging mismanagement and negligence in the performance of duties by them and requesting that the Board should be suspended in terms of Section 41(1) of the Act. A copy of the said petition was also sent to the Minister, Co-operative Department, Government of Bihar who also put up a note in lieu of buff-sheet before the Registrar, Co-operative Societies referring to the aforesaid letter stating that the facts mentioned in the letter should be examined and immediate necessary action should be taken in accordance with law and he should also be informed about the action taken through the concerned file. Pursuant to the said petition by order dated 20.10.2008 (Annexure-5), the Registrar appointed a three-member Committee headed by the Additional Registrar, Co-operative Societies to look into the allegations and submit its enquiry report within fifteen days. The report of the three-member Committee was submitted to the Registrar on 4.12.2008 in which most of the allegations were found true. On the basis of the same an order bearing memo No. 7566 dated 5.12.2008 was issued by the Registrar enclosing the allegation petition and the report of the three-member Enquiry Committee directing the Board of Directors of BISCOMAUN to show cause within 21 days as to why the Board of Directors be not suspended in exercise of powers under Section 41(1) of the Act. A copy of the said show cause was sent to the Managing Director, BISCOMAUN with a request to serve the copy of the order upon all the members of the Board of Directors along with photo copy of complaint petition and enquiry report.
4. On receipt of the same the said order of show cause dated 5.12.2008 has been challenged before this Court in the first writ petition being CWJC No. 18290/2008 by the two petitioners, namely, Dr. Sunil Kumar Singh, Chairman of the BISCOMAUN and the Board of Directors though its Chairman, the petitioner No. 1, praying to quash the order dated 5.12.2008. The matter was pressed on 23.12.2008 for grant of an interim order staying the show cause notice which was served upon the petitioners on 10.12.2008. By order dated 23.12.2008 while refusing the prayer for stay of the order dated 5.12.2008 this Court considering the submission of learned Counsel for the petitioners that the show cause notice had been served on 10.12.2008 directed that in terms of the statutory provisions the petitioners shall be permitted to file their show cause by 31st December, 2008 and thereafter to consider the same in accordance with law. On 30.12.2008 the petitioner No. 1 of the first writ application, Chairman of the Board of Directors filed his show cause stating that it is the preliminary reply to the show cause by the Chairman of the BISCOMAUN in his personal capacity on the basis of the evidence/documents available with him and on the basis of his memory. In the said reply he alleged that the three-member Committee had been constituted and the notices were issued on the direction of the Minister, Co-operative Department and further that the Committee had submitted its report on the pressure of the Minister and in conspiracy with the Managing Director and Respondent No. 8 on imaginary basis and without examining the same he had issued the show cause notice. It was also alleged that several times the petitioner No. 1 had orally and in writing requested the Managing Director to make available the files relating to the enquiry report and to convene the meeting of the Board of Directors but in conspiracy the same was not called and by his letter dated 17.12.2008 addressed to the Registrar the M.D. stated that for giving reply to the show cause notice there is no justification for calling a meeting of Board of Directors, a copy of which was given to petitioner No. 1 also. It was also pointed out that on 19.12.2008 the Chairman had informed the Registrar of all the aspects of the matter and requested him to get the meeting of the Board of Directors convened and the files concerning the enquiry report to be given since effective reply could be submitted only by the Board of Directors and no reply by a Director at his personal level can be considered as of the Board of Directors. Since the meeting of the Board of Directors was not called and the evidence/documents not provided to the Board or to him it was submitted that at that preliminary stage the reply was being submitted on the basis of the evidence/files available with him and according to his memory. Thereafter by the impugned order dated 12.1.2009 the Respondent No. 3, Registrar, Co-operative Societies considered the show cause reply filed by the petitioner No. 1 and, after finding several of the charges proved, passed the aforesaid order suspending the Board of Directors.
5. Learned Counsel for the petitioners in the first writ petition submits that the impugned order has been passed in violation of the principles of natural justice. It is submitted that repeatedly the petitioner No. 1 had requested the Managing Director for convening the meeting of the Board of Directors so that a collective show cause could be filed on behalf of the Board of Directors but the same was not done. The matter was also taken to the Registrar and the Registrar ought to have directed the Managing Director to convene the meeting for the said purpose and supply all the files to the petitioners; but the same not having been done, amounts to a clear violation of the principles of natural justice.
6. It is argued that under Section 14(3)(ii) of the Act it is the function of the Managing Director to convene the meetings of the Managing Committee and the petitioner No. 1, the Chairman requested the Managing Director, Respondent No. 7, to do so and he ought not to have refused to convene the meeting. It is thus urged that the Managing Director was acting in a manner so as to prevent the Board of Directors from exercising its right of filing the show cause. In this context, learned Counsel refers to the counter affidavit of respondent No. 7 in which he has sought to support his stand that the reply should be given individually by the Chairman and each of the Directors and not by the Board as a body and the justification of the same in the impugned order by the Registrar that the reply should be individual and not of the Board. It is the contention of the learned Counsel that under Section 41(1) of the Act, it is the objection of the Board of Directors that has to be considered by the Registrar before passing an order of suspension and for the said reason also the answer to the show cause should be the product of the collective application of mind of the Board of Directors and not of each separate constituent member of the Board. Thus, according to him, preventing the meeting of the Board of Directors to file the collective show cause amounts to depriving it of its right of filing an effective show cause and the impugned order passed thereafter is illegal and invalid for the said reason.
7. Learned Counsel also refers to the letter dated 6.1.2009 and 9.1.2009 sent by petitioner No. 1, Chairman by which he had requested the Registrar to permit him to place his case before him through an Advocate but the same was not permitted and the same also amounts to refusal of the right of personal hearing without any justifiable reason and thus further violative of the principles of natural justice.
8. In this context, he refers to a decision of the Supreme Court in the case of Swadeshi Cotton Mills v. Union of India and analogous cases : (1981) 1 SCC 664, in para-32 of which it has been held as follows:
The maxim audi alteram partem has many facets. Two of them are: (a) notice of the case to be met; and (b) opportunity to explain. This rule is universally respected and duty to afford a fair hearing in Lord Loreburn's oft-quoted language, is 'a duty lying upon everyone who decides something', in the exercise of legal power. The rule cannot be sacrificed at the altar of administrative convenience or celerity; for, 'convenience and justice'- as Lord Atkin felicitously put it - 'are often not on speaking terms
9. He further relies upon the Supreme Court decision in the case of State of U.P. and Ors. v. Maharaja Dharmander Prasad Singh and Ors. and another analogous case : (1989) 2 SCC 505, in para 64 of which it has been held as follows:
On the point of denial of natural justice, we agree with conclusion of the High Court, though not for the same reasons, that there has been such a denial in the proceedings culminating in the order of cancellation. The show cause notice itself is an impalpable congeries of suspicions and fears, of relevant or irrelevant matter and has included some trivia. On a matter of such importance where the stakes are heavy for the lessees who claim to have made large investments on the project and where a number of grounds require the determination of factual matters of some complexity, the statutory authority should, in the facts of this case, have afforded a personal hearing.
10. He further relies upon the Supreme Court decision in the case of Canara Bank v. V.K. Awasthy : (2005) 6 SCC 321, para 14 of which is quoted below:
Concept of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed there under. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry is held. The old distinction between a judicial act and an administrative act has withered away. Even an administrative order which involves civil consequences must be consistent with the rules of natural justice. The expression 'civil consequences' encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. In its wide umbrella comes everything that affects a citizen in his civil life.
11. Another submission of learned Counsel for the petitioners is that the findings of the Registrar are based upon the report dated 4.12.2008 of the three-member Enquiry Committee which itself is constituted contrary to the provisions of Section 35 of the Act. According to him, in such statutory enquiry opportunity ought to have been given to the Managing Committee/Board of Directors but the same was not done. It is also argued that the Committee had not been constituted either on the request of the District Collector or on the application of a majority of the Managing Committee or of not less than one-third of the members; rather the same has been done on the basis of a complaint filed by an outsider which is not permissible.
12. It is also the contention of learned Counsel that the findings of the Registrar are bad on three counts, namely, non-consideration of relevant materials, consideration of irrelevant materials and further the findings are contrary to the statutory duties imposed.
13. It is submitted that under the bye-law 43(1) it is the duty of the Managing Director to summon all meetings and further under bye-law 21 orders for the general meeting shall be issued by the Managing Director. Thus, it is submitted that it is the Managing Director who is responsible for calling the general meeting and if he has failed to do so the said charge, being Charge No. 1, cannot be laid at the door of the Board of Directors of BISCOMAUN as has been done in the present matter.
14. Regarding Charge No. 2, i.e., non-preparation of Budget also it is submitted that the same is the duty of the Managing Director under bye-law 36(4) under which he is required to ensure that all accounts and registers, vouchers, balance sheets and other documents required for the transaction of the business of the Union are maintained properly with the assistance of the staff. In this regard, it is further submitted that the findings have been recorded in the order of the Registrar against the Managing Director also and thus the said charge could not have been held against the Board of Directors so as to suspend it.
15. Similarly, with regard to charge No. 3, it is submitted that the matter related to increase of share capital which action has been upheld up till the High Court and the same has been done in a general meeting by a resolution taken in June, 2005 and in which all had participated and thus it cannot be said that any of the members of the BISCOMAUN was unaware of the same. It is contended that the District Co-operative Officer had been issued letter by the BISCOMAUN on 1.2.2007 and 27.2.2007 to ensure that all the members were informed about the increase of share capital and their responsibility to deposit the additional amount on such increase and thus it cannot be said that there was attempt by the members of the Board of Directors to prevent knowledge of the fact to the other member societies so that the society could not be eligible to send delegates.
16. Similarly with respect to the other charges it is urged that sufficient proof was shown that the Board of Directors was not responsible in the matter and all the charges are well explained.
17. Learned Counsel for the petitioners in CWJC No. 470/2009, while adopting the above submissions, additionally points out that they had repeatedly requested the Registrar to convene the meeting of the Board of Directors and supply relevant papers and to issue direction to the Managing Director in this regard but the same was not done and thus the reply on behalf of the Board of Directors could not be filed. He also refers to the admission of the fact in the impugned order that as many as six Directors had requested the Registrar to convene the meeting of the Board of Directors. It is thus submitted that they were prevented from filing their show cause in the matter and on the said ground alone the impugned order is fit to be set aside.
18. Learned Counsels for the petitioners have also strongly denounced the actions of the Managing Director of BISCOMAUN who has been impleaded as respondent by name. It is submitted that he has acted in a mala fide manner and violated the statutory rules and bye-laws by repeatedly disobeying the request made by the Chairman for convening the meeting of the Board of Directors. It is submitted that the notice dated 5.12.2008 was clearly issued to the Board of Directors to show cause why it should not be suspended and thus in terms of the order dated 5.12.2008 the reply to the show cause was to be expected through the Board of Directors and in the said circumstances, the Managing Director could not have acted in the matter arbitrarily in not convening the meeting of the Board of Directors even upon several requests made by the Chairman. It is further pointed out that the Managing Director, Ashok Kumar Jha had further ensured that no file or document was ever placed before the Chairman of the Board of Directors. In this regard reference is made to his order dated 16.12.2008 in which he had directed the office of the BISCOMAUN and departmental heads to route all files and documents through the Chairman. It is further alleged that the said Managing Director in collusion with the Registrar and the complainant had sought to ensure that the Board was not allowed to meet in order to submit any show cause and even the Chairman was deprived of the perusal of the files and prevented from filing an effective show cause. It is submitted that in this regard he was acting contrary to the provisions of Section 14(3) of the Act and bye-law 42 which provides that he shall be responsible for the general administration of the Union subject to the general orders and special directions of the Board of Directors and Working Committee. Since he was responsible for convening the meeting of the Committee he ought to have convened the meeting of the Board of Directors on the request of the Chairman and not stood in the way acting as an agent of the complainant, Vishal Singh in the present matter.
19. It is also argued that as the Managing Director it was his duty to keep the Board informed about all the matters including putting up proposal for its consideration for the calling of the Annual General Meeting and also to take steps for preparation of the Budget and getting it sanctioned by the Board which he had completely failed to do. It is further submitted by learned Counsels for the petitioners that even in the impugned order several of the findings have been recorded against the Managing Director also, yet he has been allowed to continue as the Managing Director despite the suspension of the Board. According to learned Counsels the Managing Director is a directly nominated person in the Board by the State Government and if the Board of Directors is suspended then the Managing Director must also go out with the Board since he is equally responsible for the acts or omissions of the Board of Directors, if not more, on account of the day to day functioning and other matters like calling meeting, etc., and preparation of Budget, etc., being part of his personal responsibility.
20. Another contention of learned Counsels for the petitioners is that under Section 41(1) an order can only be passed by the Registrar after obtaining opinion from the Chief Executive of the affiliating Federation/Society. It is submitted that the same has not been done and for that reason also the statutory pre-condition for passing the order not having been satisfied, the order would be void and illegal.
21. Learned Advocate General appearing for the State of Bihar and learned Counsel for Mr. Vishal Singh, respondent No. 8, on the other hand, submit that the main ground on which the petitioners seek to challenge the impugned order in the writ application, that is, non-compliance of the principles of natural justice on account of the Board not having been allowed to file show cause has no legs to stand in view of Rule 28 of the Bihar Co-operative Societies Rules, 1959. The said Rule provides that the Secretary or on his failure the Chairman shall convene the meeting of the Managing Committee at least once in three months or as often as may be considered necessary for the transaction of the business of the Society. It is thus submitted that while under Section 14(3)(ii) of the Act it is the power and function of the Managing Director to convene the meeting of the Managing Committee but in addition power has been conferred upon the Chairman also by the Statutory rules to convene the meeting on the failure of the Managing Director to do so. It is submitted that it was open to the Chairman, petitioner No. 1, to call the meeting of the Board of Directors, if it was so thought necessary by him, for the purpose of filing reply to the show cause. According to learned Counsels for the respondents the failure of the Chairman to call the meeting was deliberate so as to create a ground for challenging the order before this Court and thus the non-convening of the meeting of the Board of Directors is a mere excuse in order to take such stand. It is urged that no one can be permitted to take advantage of his own wrong, of commission or omission, and the Chairman having failed to exercise his power to convene the meeting of the Board of Directors cannot be permitted to turn around and urge that point in support of his case.
22. In this regard it is submitted by learned Counsels that request of the Chairman or even of certain Directors to the Registrar to direct the Managing Director to convene the meeting of the Board of Directors should also be given no credence for the same reasons apart from the fact that it is no part of the duty of the Registrar to direct the Managing Director of any Co-operative Society to convene the meeting of the Board of Directors. The same pertains to the internal functioning of the society and the Board of Directors which is to be resolved in terms of the statutory provisions, rules and bye-laws and not at all by calling for the intervention by the Registrar.
23. It is also urged by learned Counsels for the aforesaid respondents that as late as on 23.12.2008 when the matter was being argued before this Court for stay of show cause notice no such stand was taken that the Board of Directors was being prevented from meeting or that the direction of the Board of Directors to submit files before it for perusal is being flouted by the officials of BISCOMAUN and as the petitioners, Chairman and the Board of Directors, in the first writ petition had been able to obtain extension of the time for filing reply to the show cause they could have also obtained appropriate direction from this Court on that date itself because the correspondences made by the petitioners in this regard were of prior dates and thus the same was deliberately not sought for so as to create grounds in their favour against the final order.
24. It is further submitted by learned Counsels that irrespective of the findings of the Registrar that the reply should have been filed individually and not collectively, agreeing with what had earlier been contended before him by the Managing Director, the notice to show cause having been validly served upon each of the Directors on the Board including the Chairman, thereafter it was not the concern of the Registrar as to whether the show cause was filed individually or collectively. Any observations in the impugned order by the Registrar in this regard has no legal relevance and it was for the petitioners to decide how they would proceed for the filing of the show cause.
25. So far as the individual charges are concerned, it is firstly submitted by learned Counsels for answering respondents that this Court in its writ jurisdiction does not sit as an appellate authority on the findings arrived at by the Registrar who acts as a statutory authority.
26. It is submitted that Section 41 provides that the Registrar being of the opinion that the Managing Committee is mismanaging the affairs of the registered society or persistently making default or is negligent in the performance of the duties imposed upon it by the Act, Rules or the bye-laws, he may after giving opportunity to the managing committee to state its objection and after obtaining opinion within twenty one days from the Chief Executive of the affiliating Federation/Society, by order in writing suspend the Managing Committee for a period not exceeding six months; thus the opinion has to be of the Registrar and all that is to be seen by this Court while judicially reviewing the order of the Registrar is as to whether the opinion arrived at is based upon some materials and that it is not perverse. It is submitted that the Registrar has dealt with the charges in a fair manner and whichever charge was found not proved or irrelevant he had on a consideration of the reply filed by the Chairman held those charges as either not proved or not relevant for the consideration of the matter and with respect to the charges found true he has referred to the materials and reasons in support of the same and neither the materials nor the reasons could be considered insufficient or perverse.
27. Coming to the individual charges it is stated that the first charge concerns not calling the general meeting. It is pointed out that under Rule 20(3) of the Bihar Co-operative Societies Rules, it is clearly provided that the Managing Committee of a registered society shall within the grace period after the close of the co-operative year convene the Annual General Meeting at which all items of business as prescribed in the bye-laws of the society except the election of the members of the Managing Committee, office-bearers thereof and the delegates of the Society, shall be transacted; thus, the statutory duty of convening a General Meeting has been cast upon the Managing Committee/Board of Directors and not upon the Managing Director. It is further pointed out that under bye-law 19(a) the same provision has been laid down that the Board of Directors of the Union shall within six months of the co-operative year convene an Annual General Meeting at which all items of business as specified in the bye-laws shall be transacted. It is urged that under bye-law 21 the only function of the Managing Director is to issue notices for any General meeting and thus in this regard his function is only of a ministerial nature and calling the General meeting is purely the function of the Board of Directors/Managing Committee. Hence, it is submitted that the petitioners cannot be permitted to argue to the contrary and this ground by itself would be sufficient to hold that the Managing Committee has persistently defaulted and was negligent in performance of duty imposed upon it by the Act, Rules and the bye-laws by not calling the Annual General meeting, since it is evident from the reply of the Chairman that he admits the allegation that during the period from 29.5.2003 when the present Board of Directors was constituted only one Annual General Meeting was called on 26.6.2005 and for none of the subsequent three years the Annual General Meeting was called. Thus, according to learned Counsels the factual position stands admitted in the reply of the Chairman and has not been countered even in the writ applications filed by him and the Board of Directors or by the two other Directors.
28. Similarly, with respect to the second charge regarding non-preparation of Budget for any year, it is stated that under bye-law 36(4) it is the business of the Board of Directors to sanction the Budget and working expenses. It is urged that the attempt to throw the responsibility on the Managing Director in this regard is wholly misconceived since bye-law 43(4) only requires the Managing Director to ensure that all accounts and registers, vouchers, balance sheets and other documents required for the transaction of the business are maintained properly with the assistance of the staff. It is submitted that the maintenance of the accounts of expenses, etc. has no connection with the preparation of the Budget and it is a mere book keeping function subsequent to the preparation of Budget which has to be done before the start of the financial year and only thereafter the expenses are to be made and the accounts, registers etc. are to be maintained so as to comply with the financial outlays made in the budget. Thus, according to learned Counsels it is not at all open to the Board of Directors to contend that its function is only to sanction a budget if prepared by the Managing Director and presented before it and not otherwise.
29. With respect to the two charges of not calling the Annual General Meeting and non-preparation of Budget it is further urged that it is no where stated in the writ application that the Board of Directors asked the Managing Director to call the General meeting or directed him to see that the budget is prepared so as to be approved and sanctioned in advance of the financial year by the Board of Directors and the said order was disobeyed by the Managing Director, which would have been unbecoming of the Managing Director when as a matter of fact he has to function under the control and supervision of the Board of Directors and subject to the Act, rules and the bye-laws and not the other way around. The basic contention is that the petitioners have admitted that neither the Annual General Meetings were held nor the budgets were prepared and these two actions amount to gross negligence and persistent default in the performance of its duty by the Board of Directors.
30. Similarly, learned Counsels submit that the charge No. 3 regarding keeping the member societies in the dark regarding deposit of amounts of additional shares so as to prevent them from being included in the voters list stands proved on the basis of the materials on the record.
31. It is repeatedly urged by learned Counsels that the sufficiency of materials for forming the opinion by the Registrar under Section 41 ought not to be looked into under the writ jurisdiction of this Court since judicial review is a review of the decision making process and not of the actual decision. It is urged that charge Nos. 1 and 2 have been proved and even if the other charges are found not proved then the order of suspension ought not to be interfered with. In view of the fact that at least charge Nos. 1 and 2 have been factually admitted and only a false plea has been taken to throw the responsibility on the Managing Director, then the same must be held to be sufficient to support the order of the Registrar. It is further alleged that so far as those charges are concerned, no plea can be permitted to be taken by the petitioners regarding non-supply of relevant documents as their reply to the charges was solely on the basis of the provisions of the Act, Rules and bye-laws and not on the basis of any evidence or fact pleaded or sought to be proved to the contrary.
32. It is also submitted by learned Counsels that although very cunningly reply has been stated to be a preliminary reply but the same covers nearly 300 pages with a very large number of documents enclosed and thus, as a matter of fact, he was not at all prejudiced in the filing of the reply on the basis of the alleged non-supply of certain documents as all facts and documents were also in possession of the Chairman and that the Board is represented through him in the first writ petition and thus, as a matter of fact, no prejudice has been caused on account of alleged non-supply of certain documents.
33. It is also urged by learned Counsels that it is not an ingredient of natural justice that in all cases right of personal hearing through counsel must be given on demand and the requirement is that a person or party concerned should be made aware of the charge against him/it and given reasonable opportunity of making representation against the same. Once opportunity has been given and thereafter written representation filed by them and taken into consideration while passing the order, the same would amount to full compliance of the principles of natural justice.
34. It is further submitted by learned Counsels that the petitioners cannot be permitted to invoke the violation of the principles of natural justice unless they first satisfy the Court as to what prejudice has been caused to them on account of such noncompliance claimed by them. It is contended that so far as the first two charges regarding non-holding of the general meeting and the non-preparation of budget is concerned, the petitioners have completely failed to show as to whether anything further could have been urged by them than what has been stated in the reply of the Chairman or in the writ petition, since the factual basis of the allegations stand admitted by them.
35. With regard to non-compliance of the provisions regarding obtaining opinion of the Chief Executive of the affiliating Federation/Society, it is submitted by learned Advocate General that under Section 61(1) of the Act, it is directed that the registered co-operative society in accordance with the provisions of the Rules framed under the Act, shall be affiliated to the Bihar Cooperative Federation and accordingly, the BISCOMAUN is also affiliated to the Bihar Cooperative Federation and before passing his orders the Registrar has obtained the opinion of the Chief Executive of Bihar Co-operative Federation, being parent federation of the co-operative societies under the Act; thus, there has been no non-compliance of the provisions of the Act in this regard.
36. It is also contended by learned Counsels for the respondents that the three-member committee was set up by the Registrar not under Section 35 of the Act as a statutory enquiry committee but only as a committee for assistance in the performance of his duty under Section 41(1) of the Act to arrive at the necessary opinion, by making a preliminary enquiry into the complaint filed by respondent Vishal Singh; hence the question of compliance of the provisions of Section 35 of the Act do not arise as it is not required of the Registrar before he acts under the provisions of Section 41(1) of the Act to first appoint a statutory committee to make enquiry under Section 35 of the Act.
37. In view of the allegations made against the Managing Director regarding his acting in a manner so as to prevent the Board of Directors from meeting by flouting the directions of the Chairman in this regard and also ensuring that the files were not supplied to the Chairman to prepare the show cause, the Managing Director has been made party respondent by name so that he may meet the charges of mala fide made against him by the petitioners. He has filed his counter affidavit. It is submitted by learned Counsel for respondent No. 7, the Managing Director, that charges of mala fide as against him can be of no consequence in the present matter since the impugned order can only be challenged on the basis of the mala fide of the authority which has passed the order and the order of Managing Director is not under challenge. It is submitted that since by the order dated 5.12.2008 the Registrar had directed him to serve that order along with photo copy of the complaint and findings of the enquiry committee upon all the Directors including the Chairman individually, accordingly he was of the view that the show cause was to be filed by each of the members of the Board of Directors individually and for the said reasons there was no justification for convening the meeting of the Board of Directors and accordingly he did not convene the same when he was requested to do so by the Chairman and in this regard he also informed the Registrar by letter dated 17.12.2008. It is submitted that at worst his action may be taken to be a misreading of the order dated 5.12.2008 of the Registrar, although the Registrar in his impugned order has also taken the same view, and he may be guilty of negligence but certainly not of mala fide in this regard by not convening the meeting of the Board of Directors. It is submitted that there is no allegation that any specific file demanded by petitioners was not supplied by him rather his letter dated 16.12.2008 to the office was not to prevent the files being supplied to the Chairman or others rather his only direction was that the same should routed through him and the same was made to facilitate the files being given and not to obstruct the same.
38. I have considered the rival submissions made by learned Counsels for the petitioners and for the respondents. As regards the stand of the petitioners that show cause notice was issued to the Board of Directors and under the provisions of the Act also has to be issued to the Managing Committee/Board of Directors, since opportunity under the Act has to be given to the Managing Committee to state its objections, therefore, the reply to show cause has also to be of the Managing Committee/Board of Directors, in my view it is evident that so far as the Act is concerned, it is primarily for the Managing Committee as a body to reply to the show cause regarding mismanagement, persistent default and negligence in performance of the duties enjoined upon it under the Act, Rules and the Bye-laws. This does not mean that individual members of the Managing Committee/Board of Directors including the Chairman do not have a right to file a show cause and if the same is filed the Registrar is not obliged to look into the same, since even under the Act the order of the Registrar can be challenged by any member of the Managing Committee. However, the show cause being required to by the Act and in fact also having been addressed to the Managing Committee it is evident that the Managing Committee/Board of Directors cannot be prevented from filing its joint/collective show cause in the matter. The finding of the Registrar to the contrary is thus not in accordance with the provisions of the Act.
39. The question which, however, arises in the present matter is whether the Board of Directors of BISCOMAUN was prevented from meeting by the action of the respondent-authorities. Here this Court is inclined to accept the submission of learned Counsels for the respondents that it is no part of the duty of the Registrar to either convene the meeting of the Board of Directors of a co-operative society nor is it any part of his duty to direct the Managing Director or any one else to do so under the Act, the statutory rules or the bye-laws. The power to convene the meeting of the Managing Committee/Board of Directors is vested in the Managing Director or the Chairman of the Board of Directors. Although the Managing Director had flouted the orders of the Chairman and refused to call the meeting of the Board of Directors for reasons stated in his letter dated 17.12.2008 to the Registrar, but the fact remains that it was open to the Chairman of the Board of Directors, the petitioner No. 1, to have convened the meeting of the Managing Committee, if necessary, through the Chariman's Cell in the BISCOMAUN and thereafter the Board could have issued appropriate directions to the Managing Director or the office to comply with their requirements to enable them to file their reply to the show cause notice. Rule 28 clearly provides the said power to the Chairman and as a matter of fact, the petitioner No. 1-Chairman was himself aware of his official powers in this regard as would be evident from his notes and order dated 21.11.2008 to the Managing Director in which he had reiterated his earlier direction to the Managing Director to convene the meeting of the Board of Directors for certain other purposes and ended his said order by saying that if the same was not done then he would be compelled to exercise the powers conferred upon him to convene the meeting of the Board of Directors on 2.12.2008 for those purposes. It is thus evident that the petitioner No. 1 at the relevant time was aware of his power to convene the meeting of the Board of Directors by his order which was issued approximately two weeks before the show cause was issued and only a false plea has been taken before this Court that the meeting of the Board of Directors could not be convened on account of the refusal of the Managing Director to convene the said meeting. Thus all submissions based on the said stand must fall as being palpably false and raised despite full knowledge of the petitioner No. 1 of the first writ petition that he himself was empowered to convene the meeting of the Board of Directors. As a matter of fact, even if the Chairman was not aware of such powers, it would not have made any difference as it is expected of any person holding responsible position to be aware of his own powers and official duties under the Act, rules and bye-laws. In the present matter, the position is much worse since plea of learned Counsels for the petitioners before this Court was that such power was exclusively of the Managing Director which has been found to be false to the knowledge of petitioner No. 1 while examining the documents filed by the petitioners themselves.
40. So far as the right of personal hearing is concerned, this Court is in agreement with the submission of learned Counsels for the respondents that mere failing to provide an oral hearing either personally or through counsel cannot ipso facto amount to violation of natural justice. The principles of natural justice cannot be put in a strait- jacket. Their application depends upon the facts of each case and the requirement of fair hearing would vary from case to case according to the needs and exigencies of the situation. The basic requirement of natural justice and principle of fair play is that a person or body must know the charges or allegations that he/it has to meet and he/it must be given an opportunity to represent against the same. Whether a representation would suffice in the facts and circumstances or a more detailed procedure is required whether personal hearing or permitting the leading of evidence, etc. depends upon the nature of the case and the rights affected. Unless the Statute so requires the same cannot be readily inferred; rather if the statute does not require the grant of oral hearing, specially through counsel, then the same cannot be lightly presumed unless the facts of the case so justifies. In the present case I find that Section 41(1) of the Act only requires that the Managing Committee be given an opportunity to file its objections against the notice issued to it why it should not be suspended. The complaint containing the details of charges and the findings arrived at on the preliminary enquiry were placed before the members of the Board of Directors of the BISCOMAUN and they were given opportunity to file their representation against the same. In the facts of the present case, I do not find that there was any requirement of further giving oral hearing that too through a counsel.
41. In this regard, it should be noted that Section 41(1) of the Act does not apply to all co-operative societies but is confined to such registered societies only in which the economic interest of the Government is apparently clear and only with respect to such a society where mismanagement, persistent default or negligence is found in the performance of duties by the Managing Committee/Board of Directors, then the Registrar has been conferred with the power under the Act to suspend it. In the case of BISCOMAUN more than 90 per cent shares are held by the Government and no such plea has been taken by the petitioners that it is not a registered society in which the Government has substantial economic interest although the said fact is clearly enumerated both in the charges and in the findings of the enquiry committee. It is evident that in such co-operative societies the interest of the Chairman or the Board of Directors cannot stand on such a high footing as to require them to be given a personal hearing through counsel. The reliance by learned Counsel for the petitioners on the case of Maharaja Dharmander Pd. Singh (supra) can thus be of no avail as in the said case personal hearing was held by the Supreme Court to be required in view of the heavy stakes of the petitioners of that case who claimed to have made large investments. No such claim is available to the petitioner of the present case; on the contrary it is the extremely high stake of the government which is involved.
42. The view that no personal hearing was required to be given in the present matter is also supported by the Constitution Bench decision of the Apex Court in the case of Union of India v. Jyoti Prakash Mitter : AIR 1971 SC 1093, in para-25 of which it has been held as follows:
Article 217(3) does not guarantee a right of personal hearing. In a proceeding of a judicial nature, the basic rules of natural justice must be followed. The respondent was on that account entitled to make a representation. But it is not necessarily an incident of the rules of natural justice that personal hearing must be given to a party likely to be affected by the order. Except in proceedings in Courts, a mere denial of opportunity of making an oral representation will not, without more, vitiate the proceeding. A party likely to be affected by a decision is entitled to know the evidence against him and to have an opportunity of making a representation. He however cannot claim that an order made without affording him an opportunity of a personal hearing is invalid.
43. The same principle is also laid down in the three Judges Bench decision of the Supreme Court in the case of Madhya Pradesh Industries Ltd. v. Union of India and Ors. : AIR 1966 SC 671, in para-10 of which it has been laid down as follows:
As regards the second contention, I do not think that the appellant is entitled as of right to a personal hearing. It is no doubt a principle of natural justice that a quasi-judicial tribunal cannot make any decision adverse to a party without giving him an effective opportunity of meeting any relevant allegations against him. Indeed, Rule 55 of the Rules, quoted supra, recognizes the said principle and states that no order shall be passed against any applicant unless he has been given an opportunity to make his representations against the comments, if any, received from the State Government or other authority. The said opportunity need not necessarily be by personal hearing. It can be by written representation. Whether the said opportunity should be by written representation or by personal hearing depends upon the facts of each case and ordinarily it is in the discretion of the tribunal.
44. In view of the aforesaid decisions and considering the facts of this case I am of the view that written representation in matters like the present one, especially considering the substantial stake of the Government involved, would be sufficient to meet the requirement of natural justice.
45. So far as the specific charges are concerned, this Court is in agreement with the submissions of learned Counsels for the respondents that it does not sit in appeal over the orders of the Registrar or his opinion while acting under Section 41(1) of the Act, unless the conclusion itself is perverse in the sense that no reasonable person could have arrived at the same on the basis of the materials on the record.
46. In fact, so far as the first two charges are concerned, the admitted position is that the only Annual General Meeting called by the petitioner-Board of Directors was on 26.6.2005 and thereafter for three successive years there has not been any Annual General Meeting. It is evident from the provisions of Rule 20(3) and bye-law 19(a) that the calling of the Annual General Meeting is the duty of the Board of Directors; the function of the Managing Director is only to issue notices in that regard and further that the Managing Director under Section 40(3) of the Act as also under bye-law 42 is required to function under the general control and supervision of the Board of Directors as also subject to its general orders and special directions.
47. Thus, it is not open to the petitioners to take a plea that since the Managing Director did not put up any proposal before the Board to convene the Annual General Meeting, therefore, the Board was absolved of its statutory duty to call the Annual General Meetings. The fact being admitted and the only plea taken that the Managing Director had not put up the proposals before the Board, it has to be accepted that persistent default has been committed by the Board of Directors in not calling the Annual General Meeting and that it has been negligent in the performance of the duty imposed upon it by the Rules and the Bye-laws.
48. Similarly, this Court is inclined to accept the submission of learned Counsels for the respondents that the sanction of budget is the function of the Board of Directors, since that is the mandate of bye-law 36(4). If no budget is prepared then it only means that there has been violation of the basic principles of financial discipline in the functioning of the institution. The duty having been entrusted to the Board it is not open to the petitioners to take the plea that since it is the duty of the Managing Director to ensure that all accounts and registers, vouchers, balance sheets and other documents required for the transaction of the business of the Union are maintained properly with the assistance of the staff therefore he must present the budget before the Board. It was for the Managing Committee/Board of Directors to ensure that the Budget was prepared by issuing necessary directions to the Managing Director and other staff of the BISCOMAUN and thereafter the expenses to be made in accordance with the budget as sanctioned by it. It is certainly not the exclusive function of the Managing Director to do so apart from and except in terms of the directions and orders of the Board in this regard. Use of the word 'to sanction the Budget' does not mean that the Board must sit as a passive entity and act only if the Budget is prepared by the permanent staff headed by the Managing Director and placed before it. Even though the Budget would have to be prepared by the permanent staff of the BISCOMAUN it is the duty of the Board of Directors to ensure that the same is prepared well before the commencement of the financial year and in its absence no expenses are permitted to be incurred by any one in the organization and on failure to comply with the same, to take appropriate action against the persons concerned. There is not even the slightest whisper that any such action was ever contemplated, much less taken, by the Board at any stage. There is not even a suggestion in the writ petition that the Managing Director was called upon by the Board to prepare the Budget in due time and he has disobeyed and violated the orders of the Board in this regard.
49. So far as the other allegations are concerned, this Court is not inclined to enter into the details of the charges as it is for the Registrar to arrive at a proper conclusion on the basis of the materials on the record. However, at this stage this Court is concerned that a wrong plea was taken by the Managing Director before this Court that no specific documents asked by the petitioners was ever denied to them. Learned Counsel for the petitioners has referred to the notes and order dated 17.12.2008 of the petitioner-Chairman addressed to the Managing Director in which he has directed the Managing Director to produce the various documents enumerated therein before him.
50. So far as the charge Nos. 1 and 2 are concerned, the only documents asked by the Petitioner No. 1 is with respect to those files in which the Managing Director had brought the concerned memorandum before the Board of Directors for the holding of General Meeting. Similarly with respect to charge No. 2 reply was sought as to on which date the budgets were prepared and on which date the Managing Director had brought necessary memorandum before the Board of Director in this regard. It is evident from the documents and information sought with respect to charge Nos. 1 and 2 that they presumed that it is the duty of the Managing Director to call the general meeting and to prepare the budget and place the memorandum with respect to the same before the Board of Directors and the Board of Directors had a mere passive role to play in this regard. Thus, even if the said files, which were evidently not in existence, were not produced and queries were not answered, in view of the findings recorded above, it is clear that the absence of those files could have no effect so far as the petitioners' defence and answer to those charges are concerned.
51. So far as the other charges are concerned, with respect to which the various documents had been called for, admittedly they have not been produced before the Chairman or the Board of Directors. Those documents may have been relevant in answering the charges made against the Board and thus any adverse finding that may have been recorded with respect to Charge No. 3 onwards must be held to be vitiated by non-compliance of the principles of natural justice as the Chairman and the Board of Directors were entitled to peruse those files and documents in order to file an effective show cause with respect to them. This Court, therefore, comes to the conclusion that no action is permissible and it is not open to the Registrar to take action under Section 41(1) on the basis of the said Charges Nos. 3 onwards in view of the fact that the Managing Director had failed to supply the necessary documents and materials to enable the Chairman and the Board of Directors to file an effective representation with respect to those charges and all findings with respect to them must be treated as non est and invalid on account of failure to provide effective opportunity for meeting the said charges.
52. That being so the fact still remains that the first two charges regarding persistent default and negligence in holding the Annual General Meetings and in sanctioning the Budgets stand admitted which clearly brings the case within the purview of Section 41(1) of the Act. The petitioners cannot be permitted to take technical pleas regarding non-supply of documents in this regard since all that they wanted to know is as to when the Managing Director had put up the proposals and memorandum before the Board in these matters and completely tried to shake off their own responsibility. The relevant question here would be as to whether the Board directed the Managing Director to issue notices for convening the Annual General Meeting and further to see that the Annual Budgets are prepared and the Managing Director had violated such orders of the Board; that not being at all even the stand of the petitioners it has to be deemed that non-supply of non-existent files with respect to Charge No. 1 or answer to the query with respect to Charge No. 2 by the Managing Director does not at all amount to any prejudice caused to the Board of Directors with respect to the said two charges.
53. It is now the established proposition that a mere technical violation of the principles of natural justice cannot be relied upon for getting an order quashed unless the party is able to show that he was prejudiced in the matter. The distinction made by the Courts in this regard is as to whether there has been a complete non-compliance of the principles of natural justice in the sense that not even a notice was issued and no opportunity at all was afforded to file a representation and when the notice though issued but the hearing was not adequate or the opportunity granted was inadequate. In the first case if an order is passed without any notice and without affording any opportunity to represent then the Court may straightaway strike down any order passed. But when notice is issued indicating the charges or reasons or allegations upon which it is proposed to act and an opportunity is afforded to answer but it is alleged that the said opportunity is not adequate, then the law is that the party must show as to what prejudice was caused by not affording him such hearing or adequate opportunity. In the absence of prejudice, the Courts refuse to strike down an order on a mere technical plea of non-compliance of principles of natural justice.
54. The aforesaid proposition has been clearly laid down by the Apex Court in the case of State Bank of Patiala and Ors. v. S.K. Sharma : (1996) 3 SCC 364, para-28 of which is quoted below:
The decisions cited above make one thing clear, viz., principles of natural justice cannot be reduced to any hard and fast formulae. As said in Russell v. Duke of Norfolk (1949) All ER 109 : 65 TLR 225 way back in 1949, these principles cannot be put in a strait-jacket. Their applicability depends upon the context and the facts and circumstances of each case. See Mohinder Singh Gill v. Chief Election ComMr. : (1978) 1 SCC 405 : (1978) 2 SCR 272 The objective is to ensure a fair hearing, a fair deal, to the person whose rights are going to be affected. See A.K. Roy v. Union of India : (1982) 1 SCC 271 : 1982 SCC (Cri) 152 and Swadeshi Cotton Mills v. Union of India : (1981) 1 SCC 664. As pointed out by this Court in A.K. Kraipak v. Union of India : (1969) 2 SCC 262, the dividing line between quasi-judicial function and administrative function (affecting the rights of a party) has become quite thin and almost indistinguishable - a fact also emphasized by House of Lords in Council of Civil Service Unions v. Minister for the Civil Services: (1984) 3 All ER 935 : (1984) 3 WLR 1174 : 1985 AC 374, HL where the principles of natural justice and a fair hearing were treated as synonymous. Whichever the case, it is from the standpoint of fair hearing - applying the test of prejudice, as it may be called - that any and every complaint of violation of the rule of audi alteram partem should be examined. Indeed, there may be situations where observance of the requirement of prior notice/hearing may defeat the very proceeding - which may result in grave prejudice to public interest. It is for this reason that the rule of post-decisional hearing as a sufficient compliance with natural justice was evolved in some of the cases, e.g., Liberty Oil Mills v. Union of India : (1984) 3 SCC 465. There may also be cases where the public interest or the interests of the security of State or other similar considerations may make it inadvisable to observe the rule of audi alteram partem altogether [as in the case of situations contemplated by Clauses (b) and (c) of the proviso to Article 311(2)] or to disclose the material on which a particular action is being taken. There may indeed be any number of varying situations which it is not possible for anyone to foresee. In our respectful opinion, the principles emerging from the decided cases can be stated in the following terms in relation to the disciplinary orders and enquiries: a distinction ought to be made between violation of the principle of natural justice, audi alteram partem, as such and violation of a facet of the said principle. In other words, distinction is between 'no notice'/'no hearing' and 'no adequate hearing or to put it in different words, 'no opportunity' and 'no adequate opportunity'. To illustrate - take a case where the person is dismissed from service without hearing him altogether as in Ridge v. Baldwin 1964 AC 40: (1963) 2 All ER 66 : (1963) 2 WLR 935. It would be a case falling under the first category and the order of dismissal would be invalid - or void, if one chooses to use that expression Calvin v. Carr 1980 AC 574 : (1979) 2 All ER 440 : (1979) 2 WLR 755 PC. But where the person is dismissed from service, say, without supplying him a copy of the enquiry officer's report Managing Director, ECIL v. B. Karunakar : (1993) 4 SCC 727 : 1993 SCC (L & S) 1184 : (1993) 25 ATC 704 or without affording him a due opportunity of cross-examining a witness K.L. Tripathi : (1984) 1 SCC 43 : 1984 SCC (L & S) 62 it would be a case falling in the latter category - violation of a facet of the said rule of natural justice - in which case, the validity of the order has to be tested on the touchstone of prejudice, i.e., whether, all in all, the person concerned did or did not have a fair hearing. It would not be correct - in the light of the above decisions to say that for any and every violation of a facet of natural justice or of a rule incorporating such facet, the order passed is altogether void and ought to be set aside without further enquiry. In our opinion, the approach and test adopted in B. Karunakar : (1993) 4 SCC 727 : 1993 SCC (L&S;) 1184: (1993) 25 ATC 704) should govern all cases where the complaint is not that there was no hearing (no notice, no opportunity and no hearing) but one of not affording a proper hearing (i.e., adequate or a full hearing) or of violation of a procedural rule or requirement governing the enquiry; the complaint should be examined on the touchstone of prejudice as aforesaid.
55. Applying the principles laid down above, it is evident that the petitioners admit the fact that there has been no Annual General Meeting after 2005 arid they further admit that no budget has been sanctioned by the Board of Directors at any point of time. The only ground they have taken is that the meeting of the Board was not permitted to be convened and thus they were prevented from filing a collective show cause and further certain files asked by them were not produced by the Managing Director. As discussed above, those files did not relate to any action of the Board of Directors calling the Managing Director to issue notice for calling Annual General Meeting or directing him to ensure that the budget is prepared well in time before the commencement of the financial year; rather they merely asked for documents as to when the Managing Director had produced necessary memorandum for holding Annual General Meeting or for the sanctioning of the budget before the Board of Directors. As held above it was non-supply of the said non-existent files. In any case, on the first two charges, supply or non-supply of file is not the actual issue, as according to the applicable legal position it was for the Board of Directors to have taken steps in this regard and not to throw the responsibility for the same on the Managing Director. Thus, so far as charge Nos. 1 and 2 are concerned, the petitioners cannot claim that any prejudice has been caused to them by non-supply of documents which were, in fact, non-existent and irrelevant for the answer to the said charges.
56. The aforesaid being the position and the first two charges being effectively admitted, leading to the conclusion of persistent default and negligence on the part of the Managing Committee/Board of Directors, it cannot be held that the impugned order of the Registrar cannot be sustained under Section 41(1) of the Act. In the opinion of this Court either of those charges would be sufficient for taking action under Section 41(1) of the Act and in that situation no interference is called for with the impugned order passed by the Registrar.
57. So far as the claim of the two petitioners in CWJC No. 470/2009 is concerned, it is evident that the first writ petition itself was not only filed on behalf of the Chairman but also on behalf of the Board of Directors, thus their plea that they could not have called the meeting of the Board of Directors since they had no such power does not appear to be sustainable. As a matter of fact, they have only written to the Registrar to call the meeting of the Board of Directors which is no part of the duty of the Registrar and they have not even been able to show that they have made any such request directly to the Managing Director/Chairman of the Board of Directors which has been refused. Further the Board of Directors is itself the petitioner No. 2 in the first writ petition and no such plea was taken by the petitioners of that case as late as on 23.12.2008 when the matter was under consideration before this Court and certain directions were issued to extend the time within which they could file the representation while refusing the prayer for stay. It appears that the pleas raised in the second