SHANKARBHAI DEVJIBHAI PATEL v. SABARKANTHA JILLA SAHAKARI KHARID VECHAN SANGH LIMITED — 1984 DIGILAW 60 (GUJ)

A. P. RAVANI, J. ( 1 ) CAN the Gujarat State Co-operative Tribunal be validly constituted without inclusion of a `lawyer-member ? This question has arisen in the context of Rule 78 of the Gujarat State Co-operative Societies Rules 1965 which prescribes qualification of members of the Gujarat State Co-operative Tribunal. Another question is-If members of managing committee of a society decide to spend the finds of the society in irregular fashion on account of over exuberance due to honest mistake and without any unjust or improper motive would it amount to misconduct inviting action for `surcharge as provided under Section 93 of the Act ? ( 2 ) THESE are the main questions which call for examination and answer in the backdrop of the following facts: ( 3 ) RESPONDENT No. 1-Society is registered as a co-operative society on February 24 1949 and its registration No. is 12589. It is a federal society. At the relevant time petitioner No. 22 was the Manager of the Society and other petitioners were the members of the Managing Committee of the Society. In connection with the affairs of the Society for the period commencing from July 1 1973 to June 30 1975 special audit was carried out which was completed on October 20 1976 Thereafter respondent No. 2 ordered that one Shri B. C. Vora be appointed as an Investigating Officer for carrying out investigation under Section 93 (1) of the Gujarat Co-operative Societies Act (hereinafter referred to as the Act for brevity sake ). In this order certain items for the purpose of investigation were mentioned. Thereafter another order dated April 27 1977 was passed and further items were included for the purpose of investigation. The petitioners were called upon to explain the allegations made against them. The petitioners replied to the same. After affording an opportunity of being heard and after following the procedure in accordance with law the Investigation Officer passed an order dated August 10 1979 By this order he held that the petitioners were liable for the following items:1 The Committee had given wrist-watches and/or clocks to the members of the Committee on the occasion of Silver Jubilee celebration of the Society. This was not in accordance with the provisions of Sections 65 and 66 of the Act. This was not in accordance with the provisions of Sections 65 and 66 of the Act. The members of the Committee were liable to reimburse the Society in respect of the expenditure incurred in this behalf. 2 That stainless steel utensils like TAPELI (cooking pot) were given to the staff members and to the ordinary members of the society on the occasion of Silver Jubilee. For the expenditure incurred on this count also the Managing Committee members were held liable. 3 An amount of Rs. 18 839. 28 P was spent from the `sahakar Prachar Fund and an amount of Rs. 96 35. 75 P was spent from `customer bonus fund. All the members of the Committee were held liable for the aforesaid amount also. ( 4 ) THE petitioners felt aggrieved by the aforesaid order and preferred two separate appeals being Appeals Nos. 152 and 153 of 1979 before the Gujarat State Co-operative Tribunal. The Tribunal after hearing the parties held that the order passed by the Investigating Officer was legal and valid and and dismissed the appeals by its common order dated June 18 1981 The petitioners have preferred this Special Civil Application under Article 227 of the Constitution of India and have challenged the legality and validity of the aforesaid orders passed by the lower authorities. The petitioners challenge is two-fold: (1) The constitution of the Tribunal was not in accordance with the provisions of the Act and Rules inasmuch as at the relevant time no Member of the Tribunal possessed requisite qualifications of being an advocate or pleader of not less than ten years standing. Therefore the constitution of the Tribunal being against the provisions of law and particularly against the provisions of Rule 78 of the Cooperative Societies Rules 1965 (the Rules for short) the decision rendered by the Tribunal is illegal and void and ineffective in law. (2) On merits it has been contended that the decision arrived at by the lower authorities is required to be interfered with on account of the fact that the lower authorities have failed to exercise their jurisdiction inasmuch as they have not taken into consideration the provisions of Section 93 of the Act and the decision arrived at by the lower authorities is also vitiated because there is contravention of the principles of natural justice. Rule 78 of the Rules reads as under:78 Qualification of members of Co-operative Tribunals: (1) Subject to the provisions of sub-rule (2) - (a) the President of the Tribunal shall be a person who- (i) has been a judge of the High Court or (ai) has held the office of the Secretary in the Department of Cooperation or (ii) has been a District Judge or (iii) has held the office of the Registrar of Co-operative Societies in any State; (b) has been closely associated with the Co-operative movement;provided that at least one such member shall be a person who has been an advocate or a pleader for not less than ten years. For our purposes it is not necessary to refer to and reproduce clause (2) of the rule which disables a member of the Managing Committee of the societies mentioned therein from being appointed as the President or Member of the Tribunal. ( 5 ) IT is an undisputed position that at the relevant time the constitution of the Tribunal was as follows : (1) Shri A. S. Desai President of the Tribunal who is a retired City Civil and Sessions Judge and therefore a retired District Judge. (2) Shri R. D. Solanki who was an officer in the Co-operative Department. Relying upon the proviso to clause (b) of Rule 78 it is submitted that either the President or the Member of the Tribunal was not an advocate or pleader and that there was no other member of the Tribunal who was an advocate or pleader for not less than 10 years. In this view of the matter the constitution of the Tribunal itself becomes illegal and void. Therefore contends the counsel for the petitioners any decision taken by such a Tribunal which is not constituted in accordance with the rules is also illegal and void. ( 6 ) LET us have a look at some basic principles in this behalf. It is the cardinal principle of interpretation of statute that a provision of a statute cannot be interpreted in isolation. The entire scheme of the Act the object of the statute concerned and all the relevant parts of the Act as well as the rules should be taken into consideration and thereafter only the correct meaning of that particular provision can be ascertained. The entire scheme of the Act the object of the statute concerned and all the relevant parts of the Act as well as the rules should be taken into consideration and thereafter only the correct meaning of that particular provision can be ascertained. (see Hubli Municipality v. Subba Rao reported in AIR 1976 SC 1398 ) the approach of the court should be rather it is the bounden duty of the court to consider all other parts of the Act which throw light on the intention of the legislature and which may serve to show that the particular provision ought not to be construed as it would be standing alone and apart from the rest of the Act. The statute must be read as a whole and every provision in the statute must be construed with reference to the context and other clauses in the statute so as as far as possible to make a consistent enactment of the whole statute. (see Hubli Municipality (supra) AIR 1976 SC 1398 para 9) ( 7 ) IN this connection reference to another decision of the Supreme Court in the case of S. T. O. v. H. Farid Ahmed and sons reported in (1976) 1 SCC 245 may also be made wherein the Supreme Court has in terms held that the rule cannot be interpreted in a way so as to come in conflict with the parent Act in which case the Act will prevail. In case there is conflict between the provisions of Rule and the Act the provisions of the Act shall prevail and it may farther be noted that the attempt of the court should be rather it is the duty of the court to see that the conflicting provisions are harmonised. Only if the provisions are incapable of being harmonised it will be open to the Court to say that either of the provisions is bad or the action taken under that provision is illegal or void. In this connection the principle laid down by the Supreme Court in the case of Chandra Mohan v. State of U. P. reported in AIR 1966 SC 1987 may be noted. In this connection the principle laid down by the Supreme Court in the case of Chandra Mohan v. State of U. P. reported in AIR 1966 SC 1987 may be noted. In para 14 of the judgment it is laid down as under :the fundamental rule of interpretation is the same ether one construes the provisions of the Constitution or an Act of Parliament namely that the court will have to find out the expressed intention from the words of the Constitution or the Act as the case may be. But it however two constructions are possible then the Court must adopt that which will ensure smooth and harmonious working of the Constitution and eschew the other which will lead to absurdity or give rise to practical inconvenience or make well-established provisions of existing law nugatory. ( 8 ) HAVING the aforesaid principles in mind let us examine the contention raised by the counsel for the petitioners If the contention is upheld it would lead to the following conclusions : (1) That there must be at least one member of the Tribunal who must be an advocate or pleader of not less than 10 years standing. (2) That in absence of an advocate member as required under the proviso to Rule 78 (b) the constitution of the Tribunal itself will be illegal and void. (3) That any decision rendered by such a Tribunal will be illegal and void. What does the Act require ? Section 150 of the Act provides that there shall be a Gujarat State Co-operative Tribunal. Sub-section (2) of Section 150 says that the Tribunal shall consist of (i) a President and (ii) not more than three other members possessing such qualifications as may be prescribed. Sub-sections (4) and (5) say that the powers and functions of the Tribunal may be exercised and discharged by Benches constituted by the President from amongst the members of the Tribunal including himself and such Benches shall consist of two or more members. Therefore as per the provisions the Act a valid Tribunal can be constituted consisting of a President and a member. Moreover a tribunal constituted in such manner can exercise powers and functions in the Bench consisting of two members or can exercise powers as one individual member while deciding interlocutory applications. Therefore as per the provisions the Act a valid Tribunal can be constituted consisting of a President and a member. Moreover a tribunal constituted in such manner can exercise powers and functions in the Bench consisting of two members or can exercise powers as one individual member while deciding interlocutory applications. Therefore it is clear that the Act does not make it obligatory rather it does not even contemplate that there must be at least one Member of the Tribunal who should possess the qualification of being an advocate or pleader of not less than 10 years standing. If this is not the intention expressed by the legislature while enacting the provisions of the Act can something which is not there be introduced by way of Rules ? Certainly not. In such a situation the provision of rules which comes in conflict with the provisions of the Act has to be so interpreted that it subserves the purpose of the Act and it does not supersede or override the provisions made in the parent Act. ( 9 ) THE argument is `look at the language of the proviso to Rule 78 (b ). It is mandatory in character on account of the following reasons: (1) That the provision pertains to qualification of members of the Tribunal (2) That the two words at least and shall occurring in the proviso indicate that the provision is mandatory (3) That by carving out proviso emphasis is given by the legislature to this particular provision; otherwise the proviso becomes redundant and (4) Even in the affidavit-in-reply filed on behalf of the Government it is stated that the constitution of the Tribunal is `incomplete (5) Assuming that the provisions of the proviso are directory then even there should be substantial compliance with the provisions thereof. The said provision cannot be completely ignored. ( 10 ) EXAMINING each and every point listed hereinabove it becomes clear that the argument is based on reading of the proviso in isolation. The argument does not take into consideration the other relevant provisions of the Act and the Rules. Thus the approach itself is erroneous. If any one tries to answer a question which is based on fallacy the answer is bound to be fallacious. Therefore care will have to be taken to see that one does not get into this fallacious cob-web and arrive at an absurd decision. Thus the approach itself is erroneous. If any one tries to answer a question which is based on fallacy the answer is bound to be fallacious. Therefore care will have to be taken to see that one does not get into this fallacious cob-web and arrive at an absurd decision. ( 11 ) IT may be noted that sub-section 2 of Section 150 of the Act itself provides that the members may possess such qualification as may be prescribed. The phrase as may be prescribed indicates that the Government may prescribe qualification may not prescribe qualification. Even if the Government does prescribe qualification it is not obligatory upon the Government to prescribe qualification in respect of one of the members of the Tribunal that he must be an advocate or pleader of not less than 10 years standing. The prescribing of qualification itself is discretionary and/or directory. Even if it is assumed that prescribing of qualification of members of the Tribunal is mandatory there is nothing in the provisions of the Act to indicate that the Government should prescribe qualifications in such a way that at least one member of the Tribunal should be an advocate or pleader of ten years standing. Therefore it cannot be said that simply because the rule provides for qualifications and proviso to Rule 78 (b) refers to specific qualification in respect of one of the members that particular part of the rule becomes mandatory. True a proviso is carved out and a specific mention with regard to the qualification of one of the members is made. But on this basis how can it be said that the provision is mandatory and so inviolable that it becomes obligatory upon the Government to appoint one of the members of the Tribunal who must be possessing that qualification ? Whether this particular provision is found either in the substantive part of the rule or in the proviso makes no difference. Therefore the argument that since the proviso has been carved out it means that emphasis is given on this aspect has no merit. ( 12 ) THE argument that otherwise the proviso becomes redundant is not correct. The proviso has meaning even otherwise and it has a purpose also. The meaning and purpose of the proviso will be shown just now. Before adverting to that aspect two other points may be dealt with. ( 12 ) THE argument that otherwise the proviso becomes redundant is not correct. The proviso has meaning even otherwise and it has a purpose also. The meaning and purpose of the proviso will be shown just now. Before adverting to that aspect two other points may be dealt with. It is submitted that in the affidavit-in-reply filed on behalf of the Government it is stated to the effect that the constitution of the Tribunal is `incomplete and therefore the proviso should be held to be mandatory and the interpretation as canvassed on behalf of the petitioners should be accepted has no basis whatsoever. First of all the statement in the affidavit-in-reply to the effect that the constitution of the Tribunal is incomplete is a statement of fact which is correct. The full coram of the Tribunal is (1) President and (2) Three other members (see Section 150 (2) of the Act ). Nothing turns on this statement. Assuming that the statement made in the affidavit-in-reply is helping the case of the petitioner even then the same cannot be the basis of decision of the Court. In that case it would mean that the Court should adopt the interpretation as per the affidavit-in-reply drafted by some counsel working in the office of Government Solicitors. Many a time in numerous cases affidavit-in-reply is produced without even understanding and grasping the real nature of the questions involved in the petition. The Court cannot abdicate its function of interpreting the provisions of statute in favour of the Government or some Government officers or solicitors. Whenever the question of interpretation arises it is the duty of the Court to interpret the relevant provisions of the Act or Rule in accordance with the provisions of law and particularly as per the principles of interpretation of statutes. The statement in the affidavit-in-reply at the best can be taken as the stand of the Government but the same cannot be made the basis for the correct interpretation of the provision of the Act or the Rules as the case may be. Hence the argument is rejected. ( 13 ) THE contention that the words at least and shall indicate mandatory nature of the proviso may be examined. The wordings of the proviso at least one such member indicate something else also. Hence the argument is rejected. ( 13 ) THE contention that the words at least and shall indicate mandatory nature of the proviso may be examined. The wordings of the proviso at least one such member indicate something else also. These words further indicate that whenever there are more than one member at least one of them shall be a person who has been an advocate or pleader for not less than 10 years. The active nature of the proviso comes into play only when the Tribunal consists of (1) a President and (2) more than one member meaning thereby only when the Tribunal consists of a President or two members or more the proviso will come into play. Before that stage the proviso does not obligate the Government to appoint a member who must be possessing the qualification of being an advocate and/or a pleader for not less than 10 years. Only at the stage when the Government desires to expand the Tribunal the proviso comes into play. Before that the Government may resort to the proviso or may not resort to the proviso. The Government may appoint a member who may be an advocate or pleader of not less than 10 years standing. Till that stage it is completely discretionary and within the powers of the Government even to ignore the proviso entirely. But thereafter at the stage when the Government intends to expand the Tribunal the proviso comes into play. At that stage it may perhaps be said that the Government will be under an obligation to appoint an advocate or pleader of not less than 10 years standing as a member of the Tribunal. ( 14 ) IT is possible to contend that even at the stage when the Government intends to expand the constitution of the Tribunal the provisions of the proviso may not become mandatory. Till the Tribunal is fully constituted meaning thereby till a President and three more members are appointed as provided under Section 150 (2) of the Act it may be said by the Government that it does not want to appoint a person who may be an advocate or pleader of not less than 10 years standing. This is possible. Till the Tribunal is fully constituted meaning thereby till a President and three more members are appointed as provided under Section 150 (2) of the Act it may be said by the Government that it does not want to appoint a person who may be an advocate or pleader of not less than 10 years standing. This is possible. Because it is not essential for the purpose of valid constitution of the Tribunal and for the purpose of exercise of the powers of the Tribunal that there must be a member possessing the qualification of being an advocate or pleader of not less than ton years standing. In the absence of an advocate member of the Tribunal the constitution of the Tribunal does not become invalid. It may be noted that when a member of the Tribunal who possesses the qualification of being an advocate or pleader of not less than 10 years standing is on the Tribunal; and remains absent and/or proceeds on leave and does not participate in the proceedings of the Tribunal the decision rendered by the Tribunal does not become invalid or illegal. ( 15 ) THE Act operates in the field of co-operation. If one looks at the entire scheme of the provisions of the Act and the Rules it becomes clear that for the adjudication of the disputes a separate machinery of registrars nominee as well as Co-operative Tribunal is provided for. The Registrar of Co-operative Societies or the District Registrar of the Co-operative Societies is not required to possess the qualification of law degree or he is not required to have experience as lawyer. Even Registrars nominees who are supposed to deal with the cases and resolve the disputes between the co-operative societies and its members and between the members inter se are not required to possess any legal qualification whatsoever. The qualification in law is not an essential pre-requisite even for becoming President of the Tribunal. Therefore it can be said that even when there is expansion of the Tribunal and the Tribunal grows in size and there are more than one member the proviso to Rule 78 (b) may be considered to be directory and may not be resorted to and no person having the qualification of being an advocate or pleader of not less than 10 years standing need be appointed. On the true construction of the relevant provision of the Act and Rules this can be the only interpretation. Rules made under a statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act and are to be judicially noticed for all purposes of construction and obligation. (see Maxwell on the Interpretation of Statues 10 Edition pages 50-5 approvingly quoted by Supreme Court in the case of State of U. P. v. Babu Ram reported in AIR 1961 SC 751 . ( 16 ) NOW therefore put the relevant provisions of the Act and the Rules together. Read them as a whole and make an attempt to interpret in consonance with the object of the Act and the underlying spirit behind the provisions of the Act and the Rules. The following position will emerge. 1 There shall be constituted a Tribunal called the Gujarat State Co-operative Tribunal to exercise the functions conferred on the Tribunal by or under the Act (Section 150 (1) ). 2 The Tribunal shall consist of- (i) a President and (ii) not more than three other members (Section 150 (2) ). 3 That a President shall be a Judge of High Court or a Secretary in the Department of Co-operation or a District Judge or Registrar of Co-operative Societies in any State (Rule 78 (1) (a) ). 4 The members should be possessing qualifications as may be prescribed (Section 150 (2) ). 5 A Member may be an officer of the Co-operative Department who holds or held office of the Joint Registrar of Co-operative Societies or who has been closely associated with the co-operative movement (Rule 78 (2) (b) ). One member should be a person who has been an advocate or a pleader for not less than 10 years (Rule 78 (2) (b) proviso)6 That the powers and functions of the Tribunal may be exercised by the Benches constituted by the President of the Tribunal (Section 150 (4) ). 7 The Benches that may be constituted shall consist of two or more members (Section 150 (5) ). 7 The Benches that may be constituted shall consist of two or more members (Section 150 (5) ). 8 However interlocutory applications may be heard and decided by one member only (Proviso to Section 150 (4) )9 That the order that may be passed by the Tribunal in appeal or revision is final (Section 150 (11) and (12) ). The Tribunal hearing an appeal is to exercise powers conferred upon an appellate court under Section 97 and Order 47 in the First Schedule of Civil Procedure Code. 10 That any vacancy that may arise in the membership of the Tribunal shall be filled in by the Government (Section 150 (3) ). Take an example of a fully constituted Tribunal in which there are three members and one President. In such a Tribunal one of the members is an advocate or a pleader for not less than 10 years. The Tribunal consists of in all four persons-a President and three other members. This Tribunal can function in two Benches consisting of two members including the President. Each one of them including the President while sitting alone can entertain hear and decide interlocutory applications. In such a Tribunal one of the members who is an advocate or pleader dies. What would be the position ? Would it be that the constitution of the Tribunal becomes invalid or illegal ? It would not. The vacancy shall have to be filled in by the Government as per the provisions of Section 150 (3 ). The vacancy if to be filled in may be filled in within a reasonable time. The Constitution of the Tribunal would not become invalid because it is not mandatory to have one member possessing the qualification of an advocate or pleader. It is not mandatory because the Act does not contemplate it. The Rules have got to be read so as to subserve the Act. That which is not in the Act cannot be introduced in the Act by way of Rules. ( 17 ) TAKE another illustration. The advocate member proceeds on leave say for a period of six months. For all practical purposes his presence on the Tribunal is meaningless. He is there on the Tribunal but he does not function. That which is not in the Act cannot be introduced in the Act by way of Rules. ( 17 ) TAKE another illustration. The advocate member proceeds on leave say for a period of six months. For all practical purposes his presence on the Tribunal is meaningless. He is there on the Tribunal but he does not function. The exercise of powers and functioning of Tribunal in the absence such an advocate member does not become illegal and invalid because the constitution of the Tribunal is as such perfectly within the provisions of the Act and the Rules. Simply because he has proceeded on leave it cannot be said that the constitution of the Tribunal becomes invalid or illegal. In above view of the matter examine the question from any point of view-either from the point of view of the harmonious construction of the provisions of the Act and the Rules or from the practical point of view. The only possible answer is that the constitution of the Tribunal in the absence of an advocate member does not become illegal and the presence or appointment of an advocate member on the Tribunal is not mandatory. The interpretation suggested by the counsel for the petitioners is misleading and perverse. No provision of a statute can be interpreted in such an isolated manner. While interpreting a statute attempt should be to see that an interpretation which avoids absurd results be adopted. It should be kept in mind that absurdity is to be avoided and not invited. If the proviso is read in isolation and the same is interpreted in the manner suggested by the counsel for the petitioner it would amount to an invitation to absurdity as something which is not in the Act will be inserted by way of Rules. This can-not be done. ( 18 ) IT may be contended that the Tribunal consists of a President and three other members as contemplated under Section 150 (2) of the Act. As per the proviso to Rule 78 (b) of the Rules at least one of the members of the Tribunal must be a lawyer of 10 years standing. On this basis it may be possible to argue that when the Tribunal is fully constituted inclusion of a lawyer member is obligatory and/ or mandatory. In the instant case the Tribunal is consisted of a President and one member. On this basis it may be possible to argue that when the Tribunal is fully constituted inclusion of a lawyer member is obligatory and/ or mandatory. In the instant case the Tribunal is consisted of a President and one member. Therefore in this case the aforesaid question does not arise. Therefore it will not be proper for me to discuss the same and make an attempt to answer. ( 19 ) HENCE the contention raised that the constitution of the Tribunal at the relevant time consisting of Shri A. S. Desai and Shri R. D. Solanki without inclusion of a lawyer member was illegal and void as being contrary to the provisions of Rule 78 cannot be accepted. Consequently further contention that the decision rendered by the Tribunal is also illegal and void has no valid basis and has got to be rejected. ( 20 ) FACED with this situation the counsel for the petitioners submitted that the decision arrived at by the lower authorities is against the principles of natural justice and has been arrived at by ignoring the provisions of Section 93 (1) of the Act. . ( 21 ) THE allegations against the petitioners which have been held proved by the Tribunal are as follows: (1) That on the occasion of the Silver Jubilee Celebration of the Society the petitioners spent certain amount for the purchase of wrist-watches and clocks and they were distributed amongst the members of the Managing Committee of the Society. This was not in accordance with the provisions of the Act and particularly the provisions of Sections 65 and 66 of the Act. Hence they were held liable to reimburse the amount spent on this score and each one of the petitioners was held liable to reimburse the amount to the extent of Rs. 262/ -. They were also subjected to the consequence flowing from this finding i. e. they would be ineligible for being the Members of the Managing Committee permanently as per the provisions of Rule 32 of the Rules. (2) It was also alleged that from the customer bonus fund accumulated and put apart by the Society certain utensils of stainless steel were purchased and distributed amongst all the members of the Society and amongst the staff members of the Society. (2) It was also alleged that from the customer bonus fund accumulated and put apart by the Society certain utensils of stainless steel were purchased and distributed amongst all the members of the Society and amongst the staff members of the Society. This was also not considered in accordance with the provisions of the Act and hence they are held liable to reimburse the Society for the amount spent on this score i. e. about Rs. 5 335 ( 22 ) SECTION 93 of the Act provides for `surcharge. As per this provision the persons in charge on the Society if found to have misapplied or retained or found to have become liable or accountable for any money or property of the society or if found guilty of misfeasance or breach of trust in relation to the Society they can be saddled with the liability in respect of the amount or property so misapplied or retained or in respect of which liability is adjudged. It has far reaching consequences. If a person is held liable under this provision the consequence is that he becomes ineligible for becoming member of the Managing Committee of the Society permanently. (see Rule 32 (f) ). Both the lower authorities proceeded on the footing that the aforesaid amount could not have been spent for the purposes stated above. The lower authorities have held that the amount could have been spent in accordance with the provisions of Sections 65 and 66 of the Act. As held by the lower authorities expenditure is not covered by the aforesaid provision. Therefore it is held that the petitioners have irregularly dealt with the funds of the Society and therefore they are guilty of the charges levelled against them. ( 23 ) IT may be noted that the annual turnover of the Society runs into crores of rupees. During the relevant period the annual purchase of the Society was more than Rs. 6. 68 crores. The total sales amounted to little over Rs. 3 crores. It is an admitted position that the petitioners who were in charge of the affairs of the Society were honest persons. As observed for the Investigating Officer the office bearers of the Society were extremely efficient and of serviceable nature. 6. 68 crores. The total sales amounted to little over Rs. 3 crores. It is an admitted position that the petitioners who were in charge of the affairs of the Society were honest persons. As observed for the Investigating Officer the office bearers of the Society were extremely efficient and of serviceable nature. However despite being self-confident and honest sometimes the funds of the Society are misused (see the order passed by the Investigating Officer page 59 of the compilation ). To the similar effect are the observations made w the Tribunal in para 11 of its order. It is observed by the Tribunal that even though the members of the Managing Committee may be well-to-do honest and of serviceable nature they are required to use the funds of the Society in the manner laid down in the Act And bylaws. If the same is used in any other manner they cannot escape from the liability. The members of the Committee are required to use the funds of the Society in accordance with the provisions of the Act and the by-laws ( 24 ) FROM the aforesaid observations made by both the lower authorities it becomes clear that the honest and integrity of the petitioners is beyond doubt. Both the lower authorities have concurrently found that the petitioners were not only honest persons but they were efficient as well as of serviceable nature. Despite the aforesaid finding and background the lower authorities came to the conclusion that the petitioners were guilty of using the funds of the Society otherwise than in accordance with the provisions of the Act and Rules and therefore they have been held liable to be `surcharged. Thus assessing the situation in proper perspective it comes to this: that there is no element of dishonest. Either on account of over-exuberance or on account of honest mistake these persons have failed to observe strictly the provisions of law. It is not wen the case of the Cooperative Department nor there is any finding to the effect that any of the petitioners is guilty of devouring the funds of the Society for his personal use. As noted herein-above the annual turnover of the Society runs into crores of rupees. The liability for which the petitioners are adjudged is in one case to the extent of Rs. 262 and in another about Rs. 5335/ -. As noted herein-above the annual turnover of the Society runs into crores of rupees. The liability for which the petitioners are adjudged is in one case to the extent of Rs. 262 and in another about Rs. 5335/ -. Be it noted that even as per the case of the Department this amount is not retained by them. Wrist-watches and wall-clocks were purchased and distributed amongst the members of the Managing Committee. Certain stainless steel utensils were purchased and distributed amongst all the members of the Society including the staff members of the Society. There were at the relevant time about 4000 such members of the Society. There were at the not been retained by the petitioners for their personal use. The articles were purchased and were distributed amongst all the members of the Society. In view of this background can the petitioners be held liable for damages and can they be held guilty of misfeasance and misapplication of funds of the Society ? ( 25 ) THE alleged misconduct is in respect of expenditure incurred by the members of the Managing Committee for the purchase of wrist-watches and wall-clocks. The other allegation in respect of which the petitioners are sought to be surcharged is with respect to the expenditure on the purchase of stainless steel utensils and the distribution thereof amongst the members of the Society and some staff members of the Society. It is an admitted position that this expenditure has been incurred on the occasion of Silver Jubilee of the Society. It is also an admitted position that this Managing Committee consists of in all 23 members. The composition of the Managing Committee is as follows: 1 Representative of the Co-op. 1 Dept. 2 Representative of Central Dist. 1 Co-operative Bank 3 Representatives of the State 2 Govt. 4 Representatives of the Member 3 Co-operative Societies 5 Representatives of new 4 members 6 Co-opted members in accordance with the provisions of by-law 2 - Total 23 -- when the Managing Committee decided to incur the expenditure as stated above necessary resolutions were passed in the meeting held for this purpose. The representative of the Cooperative Department representative of District Co-operative Bank and the representatives of the Government were present in the meeting It is further an admitted position that none of these representatives even registered a note of dissent. The representative of the Cooperative Department representative of District Co-operative Bank and the representatives of the Government were present in the meeting It is further an admitted position that none of these representatives even registered a note of dissent. ( 26 ) THE defence of the petitioners is that the expenditure on wrist-watches and wall-clocks was incurred out of the amount collected by raising funds through advertisements in a souvenir published on the occasion of Silver Jubilee. That amount did not form part of the funds of the Society. In short the defence is that the provisions of Sections 65 and 66 of the Act cannot be attracted. Similarly with regard to the second item of expenditure the defence is that the amount has been spent from the accumulated amount of customers bonus funds. Reliance is placed on the provisions of by-law 42 sub-clause (6) which provides for the distribution of profits which should be done in the same year. In the instant case the amount has been allowed to be accumulated and set apart. The distribution has not taken place in the same year. ( 27 ) IT is an admitted position that at no time the representatives nominated by the financial institutions or by the Government objected to the aforesaid expenditure being incurred by the Society. The expenditure incurred by the Society has been sanctioned by the General Body of the Society. That the prevailing notion amongst the workers in the co-operative field at the relevant time was that such an expenditure could be incurred. Even the Registrar of Cooperative Societies had issued a circular dated November 2 1975 informing all the societies in the State that distribution of gifts such as wrist-watches brief-cases steel cup-boards amongst the members of the co-operative societies or amongst the members of the managing committee of the societies was not permissible. It is stated in the circular that if such a system was being adopted by any of the societies the same should be immediately stopped and the expenditure should not be incurred from the funds of the Society. It is stated in the circular that if such a system was being adopted by any of the societies the same should be immediately stopped and the expenditure should not be incurred from the funds of the Society. ( 28 ) NOW from the aforesaid admitted position the following facts and circumstances emerge: (1) That respondent No. 1-Society was a very old Society registered sometime in the year 1949 and during the relevant year the Society had turn-over of sale and purchase running into crores of rupees i. e. purchases over Rs. 6 crores and sale roughly around Rs. 3 crores. (2) The petitioners were honest efficient and men of integrity with serviceable nature. (3) That in the alleged action of misconduct no element of dishonesty is held proved against any of the petitioners. (4) That the expenditure had been incurred by following the procedure openly meaning thereby by passing resolutions at the meeting of the Managing Committee of the Society in which representatives of the financial institutions as well as that of the Government were present. That when the decision was taken they were present in the meeting and none of them objected to it or even pointed out that it was not permissible to the society to incur such expenditure. Nothing was done stealthily. (5) That the action taken by the Managing Committee to incur the expenditure as stated above has been approved by the General Body of the Society. (6) That as per the circular dated November 2 1975 issued by the Registrar of Co-operative Societies the system of distributing such small gifts either amongst the members of the Managing Committee or amongst the members of the Society and the members of the staff was in vogue. Once the aforesaid inferences are deduced from the admitted Act on the record of the case can the petitioners be held guilty of misfeasance under the provisions of Section 93 of the Act ? For holding a person guilt of either mis-application of funds or that of misfeasance it would be necessary to prove-1 dishonesty2 negligence meaning thereby gross or wilful negligence3 wanton disregard for the rules and regulations of the Society4 misapplication of the funds for the purpose wholly ultra vires the purpose of the Society and 5 utilisation and/or application of funds in irregular fashion with some ulterior and/or improper motive for achieving some unjust object. Mere irregularity alone is not sufficient The same should be coupled with ulterior and/or improper motive The object also should be unjust. ( 29 ) IN the instant case even according to the Cooperative Department the petitioners cannot be accused of harbouring dishonest intention when they spent the amount in question. They have done everything openly. They never thought that this would amount to misconduct. Even the Government nominees were present in the meeting and in their presence the decisions were taken. They bona fide believed that the funds collected for the purpose of Silver Jubilee of the Society could be utilised for the purpose of distribution of gifts amongst the members of Managing Committee and some staff members. They bona fide believed that as per the provisions of by law 42 sub-clause (6) the amount accumulated in the customers bonus fund could be allowed to be spilled over to another year and could be distributed amongst the customers later on. None of them is held guilty for devouring the funds of the society for private gain. No unjust or improper motive is proved or even suggested. ( 30 ) IN the aforesaid facts and circumstances of the case the finding arrived at by the Investigating Officer and the Tribunal that the expenditure incurred was not in accordance with the provisions of Sections 65 and 66 of the Act may be correct. But is it sufficient to hold that such an action would amount to misconduct inviting action under Section 93 of the Act ? The action under Section 93 of the Act presupposes something more than bona fide mistakes. Simply non-observance of the provisions of a statute is not sufficient. In the instant case taking the case of the Co-operative Department at the highest it comes to this. The petitioners are honest and efficient. They are persons with integrity and of serviceable nature. But they have not followed certain provisions of the Act and the Rules strictly. When they committed this lapse it did not occur even to the Government nominees that something improper or irregular was being done. Moreover that which is held to have been irregular or improper was being done by many societies in the State. But they have not followed certain provisions of the Act and the Rules strictly. When they committed this lapse it did not occur even to the Government nominees that something improper or irregular was being done. Moreover that which is held to have been irregular or improper was being done by many societies in the State. Such practice was in vogue so much so that the Registrar of Co-operative Societies was required to issue a circular pointing out to different societies that such expenditure was not proper. Thus in the facts and circumstances of the case it cannot be said that since the expenditure incurred was not in accordance with the provisions of Sections 65 and 66 of the Act without there being anything more to suggest unjustness or impropriety it would amount to misconduct inviting action for surcharge under the provisions of Section 93 of the Act. There is no element of dishonesty. There is no element of wanton disregard of the provisions of the Act and Rules. There is nothing to suggest gross negligence or wilful negligence. Even negligence is not suggested. All that is suggested is bona fide mistake in over exuberance and hence failure to observe the provisions of law strictly. In this view of the matter the lower authorities were clearly wrong in invoking the provisions of Section 93 of the Act. The lower authorities are clearly wrong in holding that the petitioners were personally liable for the amount spent by the Society for the purchase (and distribution) of wrist-watches and wall-clocks for distributing the same to the members of the Managing Committee. Similarly the lower authorities grossly erred in holding that the petitioners were liable for the expenses incurred in connection with the purchase and distribution of stainless steel utensils to the members of the Society and to some staff members. ( 31 ) COUNSEL for the petitioners submitted that respondent No. 2 was also a Member of the Managing Committee of the Society at the relevant time. He was also party to the decision taken by the Managing Committee of the Society. Therefore his conduct was also under examination. In such a situation he could not have appointed the Investigating Officer under the provisions of Section 93 of the Act. He was also party to the decision taken by the Managing Committee of the Society. Therefore his conduct was also under examination. In such a situation he could not have appointed the Investigating Officer under the provisions of Section 93 of the Act. It is an admitted position that the Investigating Officer Shri B. C. Vora was appointed by respondent No. 2 to investigate on his behalf. This would amount to appointing a person as Judge or as an Inquiry Officer in his own cause This is clearly against the principles of natural justice. One cannot be a judge in his own cause. Incidentally it may be noted that the respondent No. 2 and other Directors who were the representatives of financial institutions and who were appointed by the Government have been exonerated. In the instant case the appointment of Shri B. C. Vora as Investigating Officer was clearly against principles of natural justice and therefore bad in law. On this count the the order passed by him on August 18 1979 (Annexure `b to the petition) is a nullity as the same is against the principles of natural justice. If the original order is held to be a nullity the order passed by the Tribunal in appeal would also amount to the confirmation of nullity. Nullity confirmed or modified remains nullity. Therefore on this ground also the order passed by the lower authorities requires to be quashed and set aside. ( 32 ) THE learned Asst. Government pleader who appears for the State submitted that in view of the decision of the Supreme Court in the case of Mohd. Yunus v. Mohd. Mustaquim reported in AIR 1984 SC 38 this Court cannot go into the details of facts even though the decision of the lower courts may appear to be erroneous or wrong. In this very decision the Supreme Court has observed as follows in para 7 of the judgment:in this case there was in our opinion no error of law much less an error apparent on the face of the record. There was no failure on the part of the learned Subordinate Judge to exercise jurisdiction nor did he act in disregard of principles of natural justice. Nor was the procedure adopted by him not in consonance with the procedure established by law. . . . There was no failure on the part of the learned Subordinate Judge to exercise jurisdiction nor did he act in disregard of principles of natural justice. Nor was the procedure adopted by him not in consonance with the procedure established by law. . . . The aforesaid observations made by the Supreme Court indicate that in cases where the lower authority has failed to exercise jurisdiction or has exercised jurisdiction in disregard of the principles of natural justice or has adopted the procedure which is not in consonance with the procedure established by law it would be open to the High Court to invoke its power under Article 227 of the Constitution of India. In the instant case there is not only an error apparent on the face of record but the principles of natural justice have been violated inasmuch as respondent No. 2 whose conduct was also under examination appointed the Investigating Officer to investigate into the conduct of the petitioners as well as his own conduct. Thus respondent No. 2 has become a judge in his own cause. Incidentally respondent No. 2 and other members of the Managing Committee who were the representatives of financial institutions or the Government representatives have been exonerated from their liability. Further in this case the principles not germane to the provisions of Section 93 of the Act have been invoked and applied. This has resulted into miscarriage of justice inasmuch as the petitioners have been rendered ineligible for becoming members of the Managing Committee of the Society permanently. In above view of the matter the contention that it is not open to the High Court to exercise its power under Article 227 of the Constitution of India in this case is rejected. ( 33 ) IN the result the petition is allowed. The orders passed by the lower authorities i. e. the Investigating officer and the Tribunal produced at Annexures `b and `c dated August 18 1979 and June 18 1981 respectively are quashed and set aside. Rule made absolute with no order as to costs. Rule made absolute. .