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1986 DIGILAW 134 (CAL)

Alenbee Co-operative Housing Society Limited v. State of West Bengal

1986-03-30

SUSANTA CHATTERJI

body1986
ORDER The present writ petition has been filed by Alenbee Co-operative Housing Society a 16B, Lake View Road, Calcutta and the Secretary of the Managing Committee. It is stated that the petitioner no. 1 is a co-operative housing society and the petitioner no. 2 is the secretary of the Managing Committee constituted on 22nd December, 1985. The first Managing Committee of the petitioner no. 1 society was constituted on 4th September, 1947 and possession of the respective flats were handed over to the respective flat owner/members of the society during the tenure of the first Managing Committee. The 4th Managing Committee being constituted on 18th April, 1984 it issued a notice of the 9th Annual General Meeting, the directors were elected. The report of the said election was sent to the Deputy Registrar, Co-operative Society (Housing), Calcutta Metropolitan area on 17th June, 1985 and thereafter on 10th July, 1985 the office bearers of the Managing Committee were elected. It is further stated that by a letter dated 12th July, 1985, the respondent No. 5, the Deputy Registrar, Co-operative Society (Housing), Calcutta Metropolitan area informed the then Managing Committee that since all the statutory agenda as per s. 21(1) of the said Act had not been covered in the notice issven for the Annual General Meeting, the same could not be considered to have been lawfully convened or held. It is also stated that thereafter on 23rd September, 1985, the State Government issued another order under the signature of the respondent No. 3 under s. 27(2) of the Co-operative Societies Act and by the said notification, the proceedings of the general meeting held on 16th June, 1983 were rescinded for non-compliance of s. 21(1) of the Act. Thereafter the State Government issued another order under the signature of the respondent No. 3 dated 18th October, 1985 to the effect that special circumstances do exist necessitating the calling by the Registrar, Co-operative Society of a general meeting and as such in exercise of the power conferred under s. 21(4) of the said Act, the Governor was pleased to permit the Deputy Registrar of Co-operative Society (Housing) to call the general meeting of the petitioner society within 3 months from the date of issue of the said order. In compliance with the order dated 18th October, 1985 the respondents no. In compliance with the order dated 18th October, 1985 the respondents no. 5 issued a notice of Annual General Meeting to be held on 22nd December, 1985. The agenda of the said meeting included election of six directors to reconstitute the Managing committee as per programme of the election. On 22nd December, 1985 election of six directors to reconstitute the Managing Committee was held in the Annual General Meeting as convened by the Deputy Registrar, Co-operative Societies (Housing) in terms of the Government order dated 18th October, 1985 Within one month of date of the election of office bearers of the Managing Committee, the said newly constituted Managing Committee took over the charge of the office and effective steps were taken for managing and controlling the affairs of the said annual general meeting held on 22nd December, 1985 as well as the election of the office bearers on 20th January, 1986 were sent to the respondent no. 5 who convened said meeting under the order of the Government. Thereafter, the newly constituted managing committee of the said society had been carrying on their duties in compliance with the statutory provision as well as the bye-laws of the society. On 3rd March, 1986, a notification was issued by the State Government that the newly constituted managing committee has been dissolved under proviso to s. 26(1) of the said Act and an administrator was appointed in place of the managing committee for a period of one year. In the said notice, it was alleged meeting of the society on 16th June, 1985 in violation of s. 21 of the said Act and has directed funds of the society for purposes other than those approved in the annual general meeting. 2. Being aggrieve by and dissatisfied with the purported exercise of power under proviso to s. 26(1) of the said Act and issuance of the impugned notice of dissolution of the managing committee dated 3rd March, 1986 the present petition was moved. On 18th March, 1986, an interim order was made. On 18th March, 1986 there was a direction to maintain status quo for a period of two weeks. There was a direction to complete the affidavits. On 8th April, 1986, the interim order was varied to the extent that the Bank respondent No. 7 would be at liberty to make available the total amount of Rs. On 18th March, 1986 there was a direction to maintain status quo for a period of two weeks. There was a direction to complete the affidavits. On 8th April, 1986, the interim order was varied to the extent that the Bank respondent No. 7 would be at liberty to make available the total amount of Rs. 5,500/-to meet the usual and monthly expenditure. On 21.4.1986, the application for addition of party was allowed. On subsequent dates, the petitioners were allowed to withdraw sums to meet the day-to-day expenditure. 3. Since all affidavits were complete, the matter was taken up for final hearing. 4. Mr. Gupta, the learned counsel, appearing for the petitioner has submitted that the impugned order was issued in purported exercise of extraordinary powers on the two allegations that the present managing committee has (a) convened the general meeting on 16th June, 1985 in violation of s. 21 of the said Act, (b) diverted funds of the society. Admittedly, the alleged diversion on funds was done by the earlier committee without considering that the present managing committee sought to be dissolved for the above reasons was constituted under Government orders and supervision of the Deputy Registrar, Co-operative Society on 22nd December, 1985 and as such no allegations can be levelled against the present committee and the impugned order is ipso facto bad in law. He has also argued that in view of the fact that the present managing committee which was sought to be dissolved, was reconstituted on 22nd December, 1985 under the order of the Government, the allegation of convening the general meeting on 16th June, 1985 does not arise and the same cannot be considered as a ground for dissolving the managing committee in purported exercise of emergency power. The allegation of diversion of funds having been admittedly made as early as in 1977 and Managing Committee on the allegation of committing of offence by 1st and 2nd Managing committee. The ground alleged in the impugned order are admittedly non-existing and cannot be attributed in any event as fault of the present managing committee. There are no elements to warrant the exercise of the extraordinary power under the 1st proviso to s. 26(1) of the said Act. Besides, the impugned order passed under extraordinary emergency power without any existing circumstances is not justified and the same is arbitrary, mala fide and without jurisdiction. There are no elements to warrant the exercise of the extraordinary power under the 1st proviso to s. 26(1) of the said Act. Besides, the impugned order passed under extraordinary emergency power without any existing circumstances is not justified and the same is arbitrary, mala fide and without jurisdiction. There are no reasons or materials on record to form a bona fide opinion by the Government that it was essential in the interest of the co-operative society or for co-operative movement to immediately dissolve the present managing committee without affording an opportunity to the petitioners of being heard and as such the impugned order is bad in law. He has strongly emphasised that on the basis of the report no prudent can from any opinion that circumstances existed for immediate dissolution of the managing committee in view of the fact that the majority of the members have been elected about two months back with the special approval of the Government and under the supervision of the respondent No. 5 and since no ground or reason was alleged to have occurred during the tenure of the said managing committee. The issuance of the impugned order is an example of excess of jurisdiction as well as violation of principle of natural justice. The Registrar and the Government did not apply their minds to the facts and circumstances of the case and the same would be evident from the fact and circumstances of the case and the same would be evident from the fact that both had full knowledge of the constitution of the new managing committee. There is, of course, violation of the rules and fair play, equity and natural justice. No details of offence done and or caused to have been done by the present committee have been provided. He has also relied upon a case reported in AIR 1964 Supreme Court, page 72. The attention of this court had been drawn to paragraphs 9 and 17 of the said decision. 5. Mr. Mukherjee, appearing for the contesting respondents has submitted that the election proceeding was absolutely illegal. There has been diversion of funds. The question of last managing committee does not arise. For the interest of the co-operative movement, the Government can exercise the powers under s. 26(1) of the Act and its proviso deals with the emergency powers. 5. Mr. Mukherjee, appearing for the contesting respondents has submitted that the election proceeding was absolutely illegal. There has been diversion of funds. The question of last managing committee does not arise. For the interest of the co-operative movement, the Government can exercise the powers under s. 26(1) of the Act and its proviso deals with the emergency powers. The writ petition is vague and there is no irregularity or illegality. 6. On behalf of the State, it is submitted that to enable the co-operative movement, there is an exercise of power under the proviso to s. 26(1) of the Act and the challenge of the writ petitioners, is ineffective and baseless All the allegations made in the writ petition have been denied. 7. Having heard the learned law years of both sides, it would be better to look into s. 26(1) including its proviso of Co-operative Societies Act which is set down hereunder: Dissolution of managing committee and appointment of administrator:- (1) If, in the opinion of the Registrar, (a) the managing committee of any co-operative society- (i) has persistently made defaults, or has been grossly negligent, in the performance of the duties imposed on it by this Act or the rules or by laws, or (ii) has committed any act which is prejudicial to the interest of such society or other co-operative societies, or (iii) has willfully disobeyed or willfully failed to comply with any lawful order or direction issued by the State Government or the Registrar ; or (b) the affairs and business of a co-operative society have, due to persistent default or negligence in the performance of duties on the part of the members of the managing committee or a section thereof, or otherwise, come to a standstill. the Registrar may, after service of a notice upon such committee and giving such committee an opportunity of being heard, by an order in writing stating reasons therefor, dissolve such committee, the members of which shall forthwith vacate their offices and the Registrar shall appoint one or more administrators to manage the affairs of such society for such period not exceeding two years at a time as may be specified in the order and may also by an order in writing extend the period, so, however, that the total period shall not exceed five years: Provided that if, on receipt of a report from the Registrar, the State Government is of opinion that in view of one or more of the aforesaid circumstances immediate dissolution of the managing committee of a co-operative society is essential in the interest of such society or the co-operative movement in general, the State Government may, without giving such committee any notice, by notification in the Official Gazette giving reasons therefore, dissolve such managing committee, the members of which shall forthwith vacate their offices, and the State Government shall appoint one or more administrators to manage the affairs of such society for such period not exceeding two years at a time as may be specified in the order and may also by order extend the period, so, however, that the total period shall not exceed five years: “Provided further that no such step towards immediate dissolution of the State co-operative bank, the central co-operative land development bank, any central co-operative bank or such other co-operative bank as comes within the purview of Part V of the Banking Regulation Act, 1949, shall be taken by the State Government without consultation with the Reserve Bank” 8. First proviso to s. 26(1), does not either expressly or by necessary implication cast any duty upon the State Government or the Registrar to act judicially before an order for the dissolution of a managing committee of a co-operative society can be passed. An order of dissolution passed under s. 26(1), proviso, is an administrative order and not a judicial or quasi-judicial order. 9. Although the State Government has not to act judicially under the above-mentioned proviso, it has to be seen whether the State Government has observed the rules of fair play and discharged its functions in a fair and just manner. 10. 9. Although the State Government has not to act judicially under the above-mentioned proviso, it has to be seen whether the State Government has observed the rules of fair play and discharged its functions in a fair and just manner. 10. Under ordinary circumstances, the Government has absolute power to give a notice to the Managing Committee to show cause as to whether there should be dissolution of the Managing Committee or not and upon adjudication of the allegations and affording an opportunity of being heard, there can be an affective order and there is provision of appeal by any aggrieved party. In the event there is emergency, on the basis of the report the Government can exercise the emergency power to immediately dissolve the managing committee and to appoint and administrator as it has been held in the present case. This Court has to examine as to whether there is any element to exercise the emergency power and the actions are bona fide, or not. It is not appreciated as to how one can make any allegation against the election proceeding to reconstitute the last managing committee under the orders of the Government and under the supervision of the respondent no. 5 No material has been produced before this court to hold that the said election is irregular or illegal. Once the election has been allowed to be held by complying with all the rules and procedures, the same cannot be set aside by a circuitous process. It has to be seen as to whether after re constitution of the managing commission prejudicial to the interest of the co-operative society or co-operative movement. There must be sufficient materials on record to justify super-session of the managing committee within two months, it had committed such acts of omission or commission prejudicial to the interest of the co-operative society or co-operative movement. There must be sufficient materials on record to justify super-session of the managing committee before any such step is being taken and it will have to be given an opportunity to show cause in the absence of any emergency. Since the election has been held lawfully and properly after compliance with all the procedures as envisaged in the Act and the Rules, it is absolutely necessary to examine as to whether any situation as to emergency arises in the instant case. Since the election has been held lawfully and properly after compliance with all the procedures as envisaged in the Act and the Rules, it is absolutely necessary to examine as to whether any situation as to emergency arises in the instant case. The question of emergency must be revealed in the report on the basis of which the emergency action has to be taken. This court has properly scrutinised the relevant report. The report refers to the actions not done by the present managing committee nor the report warrants any such emergency action to supersede the present managing committee. The attention of this court is referred to a case reported in AIR 1964 Supreme Court page 72 and in particular at page 82. The relevant portion is quoted herein-below: “In legal parlance, it would be a case of a fraud on a power, though no corrupt motive or bargain is imputed. In this sense, if it could be shown that an authority exercising a power has taken into account-it may even be bona fide and with the best of intentions, as a relevant factor something which it could not properly take into account, in deciding whether or not to exercised, the exercise of the power would be bad. Sometimes Courts are confronted with cases where the purposes sought to be actieved are mixed-some relevant and some alien to the purpose. The courts have, on occasions, resolved the difficulty by finding out the dominant purpose which impelled the action and where the power itself is conditioned by a purpose, shave proceeded to invalidate the exercise of power when any irrelevant purpose is proved to have entered the mind of the authority (See Salder v. Sheffield Corporation, 1924 1 Ch 483 as also Lord Denning observed in Fitzwilliam’s (Earl) Wentworth Estate Co. v. Mimster of Town p 307. This is on the principle that if in such a situation the dominant purpose is unlawful then the act itself is unlawful and it is not cured by saying that they had another purpose which was lawful” 11. There is further reference to a decision reported in AIR 1970 Supreme Court page 996. The principal enunciated therein does not affect the adjudication of the present case. There is further reference to a decision reported in AIR 1970 Supreme Court page 996. The principal enunciated therein does not affect the adjudication of the present case. This court has also considered the decisions reported in AIR 1970 Supreme Court page 992, 79 CWN page 986 and also AIR 986 and also AIR 1985 Supreme Court page 330. The consideration in AIR 1970 Supreme Court (supra) is not attracted in the instant case in as much as the relevant points considered in paragraphs 8 and 9 are not present in the instant case. The relevant paragraph No. 9 is set down herein-below:- “The single judge laid a great deal of emphasis on the committee being an elected body and the prejudice that would be caused to its members if they are visited with the consequences of super-session on account of irregularities and improper functioning of the previous members of the committee. What was argued before the High Court was that one third members of the committee have to retire every year and fresh member have to be elected. It certain grave irregularities are committed, say in the years 1964, 1965, it would be unfair to the new members who have been elected to supersede the committee in 1968. We do not consider that would be the correct approach in construing s. 72 which is meant for superseding the committee as a whole when its working discloses such irregularities or improprieties as would justify its super-session. Normally, it would be expected that only that committee would be superseded whose functioning has been found to be highly defective. The object of super-session apparently is to appoint a special officer or a managing committee in order to set the working of the society right. It is not difficult to envisage a situation where mal administration by a committee has so adversely affected the functioning of the society that it is essential in the interests of the society itself to give temporarily the control of its affairs to a neutral authority. At any rate if the operation of s. 72 in certain circumstances is likely to operate harshly so far as certain members of the committee are concerned, it is not possible to read into it other provisions of the Act which are not incorporated in the section expressly or by necessary implication”. 12. At any rate if the operation of s. 72 in certain circumstances is likely to operate harshly so far as certain members of the committee are concerned, it is not possible to read into it other provisions of the Act which are not incorporated in the section expressly or by necessary implication”. 12. It is clear that in the instant case, there is no existence of any member of the last managing committee on any rotation basis; on the other hand, a fresh managing committee has been re-constituted. It cannot be said that for the interest of the co-operative society, the mew managing committee should be superseded. On close scrutiny of the repot any such element is not present. Certainly, the Government can examine the question of super-session by affording an opportunity to the persons who have committed any offence within the provision of the Co-operative societies Act but certainly in the present case, there is no existence of any material to justify the exercise of the emergency power so as to topple the elected managing committee and re-constitute it according to law by not giving an opportunity of showing cause and not by giving an opportunity of hearing. This court specifically finds that there is no existence of materials to justify the exercise of such emergency power under the proviso of s. 26(1) of the Co-operative Societies Act. An argument has also been made that an alternate remedy is also available and without preferring and appeal, the present writ application has been filed. This court has also considered this aspect and it appears that since an emergency power has been exercised without justification of any materials on record, the present writ petition had to be filed to obtain a ready relief and quicker remedy. There is no bar to move the writ court and hence the present writ application is maintainable. 13. Regard being had to the said materials on record, the contentions of the writ petitioner that there is no justification to issue the impugned order to dissolve the managing committee and to appoint an administrator by impugned order are upheld. The writ petition, therefore, succeeds Let writ of certiorari is issued by setting aside and/or by quashing the impugned notification dated 3rd March, 1986. The will be on order as to the costs. Petition allowed.