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1967 DIGILAW 306 (ALL)

Devendra Pal Singh v. Dy. Registrar, Co-operative

1967-08-26

SATISH CHANDRA

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JUDGMENT Satish Chandra, J. - This petition under Article 226 of the Constitution prays that the order dated 19th May, 1967, passed by the Deputy Registrar, Co-operative Societies, be quashed and for a consequential mandamus. 2. Devendra Pal Singh, petitioner No. 1, was the Managing Director of the Aligarh District Co-operative Bank Limited, a central Co-operative Society. The other petitioner are members of its Board of Directors. On 21st March, 1967, the Bank received a show-cause notice under rule 31 (a) of the U.P. Co-operative Societies Rules, 1936, requiring the Bank to show cause against the charges of mismanagement etc. levelled therein. The Bank submitted an explanation on 4th April, 1967. In the explanation it expressed a desire that the members of the Board may be given a personal hearing. On 27th April, 1967, the Bank received information from the Deputy Registrar that 4th May, 1967, had been fixed for personal hearing On 2nd May, 1967, the Managing Director addressed a letter to the Deputy Registrar, Co-operative Societies requesting an adjournment of the date for personal hearing. It appears that the annual central meeting was to be held on 22nd May, 1967. The first petitioner requested that a date for personal hearing be fixed after 22nd May, 1967. Apparently the Deputy Registrar did not accede to this request for adjournment, and on 19th May, 1967, passed an order purporting to be under rule 31 (a) of the Rules suspending the Committee of Management (the Board of Directors) of the Bank excepting the President and the Assistant Registrar (who was a Government nominated Director) and appointing Sri A. Wasey, Assistant Registrar, as Administrator of the Bank. The order directed that the Administrator shall exercise, till further orders and subject to such restrictions as may be laid down from time to time by the Deputy Registrar, Agra, all the powers vested according to bye-laws in the Committee of Management, Executive Committee and Managing Director of the Bank. This order is sought to be quashed on the following grounds: 1. That rule 31 of the Co-operative Societies Rules, 1936, is ultra vires the rule making power conferred by Section 43 of the Co-operative Societies Act, 1912. 2. That rule 31 is void for delegation of legislative powers beyond constitutionally permissible limits. 3. That rule 31 violates Articles 31 (1) and 31 (2) of the Constitution of India. That rule 31 of the Co-operative Societies Rules, 1936, is ultra vires the rule making power conferred by Section 43 of the Co-operative Societies Act, 1912. 2. That rule 31 is void for delegation of legislative powers beyond constitutionally permissible limits. 3. That rule 31 violates Articles 31 (1) and 31 (2) of the Constitution of India. Learned counsel also argued that the impugned orders do not satisfy the conditions precedent mentioned in rule 31 and that they have been passed mala fide, and, there was no evidence or material to support the conclusions reached in the final order. I have heard learned counsel of the legal questions alone. In writ petition No. 1996 of 1967, the Varanasi Whole-sale Central Consumers Co-operative Stores v. The Deputy Registrar, Co-operative Societies, 1968 ALJ 19, decided by me today, I have upheld the first two points, namely that rule 31 is ultra vires the rule making power and in the alternative it was void for delegation of legislative powers. In the Varanasi case learned counsel appearing for the petitioner did not press the point that rule 31 violates Articles 31 (1) and 31 (2) of the Constitution. This point was not discussed in that case. In the present case, however, the learned counsel appearing for the petitioners has pressed this point also. The question whether rule 31 violates Article 31 of the Constitution would arise only if it is held that the rule is otherwise valid, that is to say it has the force of law by being within the rule making power and not being void for excessive delegation. In order to deal with the present point it will be assumed that my decision on these two points was wrong and the rule was not invalid on these grounds. Article 31 (a) of the Constitution provides that no person shall be deprived of his property save by authority of law. The Supreme Court decision in Katra Education Society, Allahabad v. State of Uttar Pradesh, A.I.R. 1966 SC 1307 throws light on the significance of the word "deprivation" as used in Article 31 (1) of the Constitution. Under the U.P. Intermediate Education Act, 1921, the basis of an effective exercise of controls envisaged by the provisions was the scheme of administration for educational institutions. Under the U.P. Intermediate Education Act, 1921, the basis of an effective exercise of controls envisaged by the provisions was the scheme of administration for educational institutions. Under Section 16D (4) , (added by U.P. Act 36 of 1958) if the scheme of administration was not submitted by the management within the time allowed, the Government could appoint an authorised controller to exercise the powers of management of the institution. This provision was challenged as infringing Articles 19 and 31 of the Constitution and the Supreme Court observed: - "The property continues to remain the property of the institution: only the right of management of the recalcitrant managers is taken away temporarily to secure compliance with the provisions of the Act. Temporary deprivation of management to secure compliance with the provisions of the Education Act does not amount to deprivation of property of the educational institution which may attract the protection granted by Article 19 or Article 31 of the Constitution." 3. Under rule 31 the management of the Co-operative Society is temporarily taken over by the Administrator with a view to save the society from an impending collapse and in that respect to carry out the purposes of the Co-operative Societies Act. There is hence no "deprivation" of property of the Co-operative Society, under Article 31 (1) . Furthermore, the Co-operative Society in the present case came into existence by registration under the Co-operative Societies Act, as it stood after rule 31 had come on the statute book. The right of the Cooperative Society itself to hold property is not a civil right but is a creature of statute, that to the Co-operative Societies Act and the Rules. A right to property, which is a creature of the statute, must be subject to the limitations imposed by that statute?. The right itself is such as is granted by the statute. The limitations imposed by the statute are inherent in the grant of the rights and the Society has in substance the limitations firmly attached to them. The Society can not claim to hold the property independently of the limitations. The provisions in the statute for enforcement of the limitations hence cannot amount to deprivations of property of the Society. The rights of the members of the Society or the office-bearers or the Directors stand on the same footing. The Society can not claim to hold the property independently of the limitations. The provisions in the statute for enforcement of the limitations hence cannot amount to deprivations of property of the Society. The rights of the members of the Society or the office-bearers or the Directors stand on the same footing. They all have only such rights as are created by the statute. The provisions of the statute placing restrictions on the rights created by it cannot amount to deprivation of such rights of property. Action taken in accordance with the statute hence will not be deprivation of property. In N.P. Ponnuswami v. The Returning Officer, Nammakkal Constituency, A.I.R. 1952 SC 64 it was held that: - "The right to vote or stand as a candidate for election is not a civil right but is a creature of statute or special law and must be subject to the limitations imposed by it. (vide paragraph 18) ." In Lala Ram Niwas v. The State of Uttar Pradesh, 1955 ALJ 836 a Division Bench of this Court held: - "The suspension of a President from his office is not a case where the property or other rights under the common law of a private citizen are taken away or affected by the order. The rights here affected are not common law rights but those created by the Statute, and as such they are governed by the provisions of the statute." 4. The learned Advocate General relied upon several decisions to this effect, which arc mentioned in the foot-note, But it is unnecessary to discuss them in detail. A.I.R. 1957 S.C. 599 (paragraphs 18, 21, 25, 26 and 27) , A.I.R. 1962 S.C. 459. (paragraphs 22, 23 and 24) , 1966 A.L.J. 987, A. I.R. 1963 Patna, 373 (paragraph 3) Another material aspect is that Article 31 (I) applies to any person, and hence to a corporation. But as held by the Supreme Court in Indo-China Steam Navigation Co. Ltd. v. Jasjit Singh, A.I.R. 1964 SC 1140, unless a person can invoke Article 19 (1) (f), his relying on Article 31 (1) is of no avail, because Article 31 (1) requires only the authority of law. As held in State Trading Corporation v. Commercial Tax Officer, A.I.R. 1963 SC 1811 corporations are not citizens and cannot invoke Article 19 (1) . As held in State Trading Corporation v. Commercial Tax Officer, A.I.R. 1963 SC 1811 corporations are not citizens and cannot invoke Article 19 (1) . A Corporation like registered Cooperative Society can be deprived of its property by authority of law without any remedy under Article 31 (1) . The Directors who are at best the agents of the Corporation do not themselves own the property of the society. Their right to the office is not property so as to acquire the status of a fundamental right. The right to the offices abolished by the Mysore Village Offices Abolition Act (see Konnalidge Gowds v. State of Mysore, A.I.R. 1964 Mysore 84, the right of a hereditary managing agent A.C. Firm v. Kalleswarar Mills, A.I.R. 1957 Mad. 309, the right of the members of a Managing Committee of a private recognised School Bhim Chandra v. D.D. Education, ILR 1956 AP 81, have been held not to be rights to "property" to which Article 31 (1) is attracted. Rule 31, in my opinion, cannot be held to infringe Article 31 (I) of the Constitution. In respect of Article 31 (2) of the Constitution, learned counsel for the petitioners urged that rule 31 provides for requisition and it provides for transfer of the right of possession of the property to the State within the meaning of sub-Article (2A) of Article 31. Since the requisition is without payment of compensation, Article 31 (2) is infringed. Rule 31 provides for transfer of possession to the Registrar or his nominee. The term "State" has been defined by Article 12 of the Constitution. In Rajasthan Electricity Board Jaipur v. Mohan Lal, Civil Appeal No. 466 of 1966, decided on 3rd April 1967 the majority of the Supreme Court held that the expression 'other authorities' in Article 12 is wide enough to include within it every authority created by a statute and functioning within the territory of India, or under the control of the Government of India. According to this view, since the Registrar acts under the statutory authority, it will be the "State" as defined in Article 12 of the Constitution. Clause (5) (a) of Article 31 of the Constitution provides that nothing in clause (2) shall affect the provisions of any existing law other than a law to which the provisions of clause (6) apply. According to this view, since the Registrar acts under the statutory authority, it will be the "State" as defined in Article 12 of the Constitution. Clause (5) (a) of Article 31 of the Constitution provides that nothing in clause (2) shall affect the provisions of any existing law other than a law to which the provisions of clause (6) apply. Clause (6) applies to any law of the State enacted not more than eighteen months before the commencement of the Constitution. The Cooperative Societies Act was a central statute. Rule 31 was enacted under Section 43 of the Act. In view of sub-sec. (5) of Section 43, rule 31 shall have effect as if enacted under the Co-operative Societies Act, which was a Central Act. It will not be a law enacted by the State. Clause (5) hence would apply. Co-operative Societies Act was an existing law when the Constitution came into force. It will not be affected by Clause (2) of Article 31. In my opinion rule 31 does not infringe Articles 31 (1) and 31 (2) of the Constitution of India. In view of my decision in writ petition No. 1996 of 1967, decided today rule 31 is ultra wires the rule making power and is void for excessive delegation of legislative 10 Civil Appeal No. 466 of 1966, decided on 3rd April, 190 powers. The impugned order dated 19th May, 1967, was without the authority of law and beyond the lawful powers possessed by the Registrar. The order is hence liable to be quashed. 4. The petition therefore, succeeds and is allowed. The impugned order dated 19th May, 1967 is quashed. The respondents are directed not to interfere with the petitioners and other members of the Board from functioning, in virtue of that order. The petitioners will be entitled to their costs. Counsel fee is assessed at Rs. 500/-.