Mohan Mishra v. State Of Bihar — 1996 DIGILAW 382 (PAT)

Judgment S. N. Jha, J. 1. Petitioners No.2, patsara Tepari Primary Agiculture credit Co-operative Society Limited, is a registered society, affiliated to the muzaffarpur Central Co-operative Bank limited, the district level society (hereinafter called central Co-operative Bank), while petitioner No.1 mohan Mishra is its member. On expiry of the term of the members and officebearers of the Managing Committee of the said Central Co-operative Bank, steps were taken for constitution of a new Managing Committee and on 24.8.94 the election programme was announced. In accordance with the said programme the list of the members was published and objections were invited. After disposal of objections, the voter list was prepared and published. The representatives of the Primary Agriculture credit Co-operative Societies being members of the said Central Co-operative bank including petitioner No. l filed their nomination papers. After the process of withdrawal and scrutiny was over a final list of candidates was published on 20.9.94. On 24.9.94 the Sub-divisional officer, Muzaffarpur East, as the Election Officer, wrote letter to the district Magistrate, Muzaffarpur, who happens to be the Administrator of the said Central Co-operative Bank and is also vested with the powers to organize elections in respect of the district level co-operative societies, seeking necessary instructions in the light of the amended by-laws of the said Central Co-operative bank. He pointed out in the letter that in terms of the third proviso to bye-law 29 representatives of the primary societies owing dues of more than 60 per cent (to the Bank are not eligible to seek election as delegate/office-bearers/directors of the Bank. In other words, according to the Sub-divisional officer, the voter list had not been prepared in accordance with the Bye-laws. The petitioners filed the present writ petition No.3.10.94 challenging the validity of the said letter dated 24.9.94, copy whereof is at Annexure-9 to the writ petition, as well as the vires of the third proviso to by-law 29 of the Bye-laws (wrongly mentioned as second proviso in the writ petition ). 2. By-law 29 provides for composition of the board of Directors (Managing Committee) consisting of 17 directors. The by-law originally contained two provisos. In terms of the first proviso, representative/delegates of the primary/affiliated societies or individual shareholders is ineligible for election as director of office-bearers "if he is a defaulter or otherwise disqualified under the provisions of the Act, Rules and the bye- law in force. The by-law originally contained two provisos. In terms of the first proviso, representative/delegates of the primary/affiliated societies or individual shareholders is ineligible for election as director of office-bearers "if he is a defaulter or otherwise disqualified under the provisions of the Act, Rules and the bye- law in force. " I am skipping the second proviso as it has no relevance in this case. The impugned proviso was added by way of compulsory amendment, by the Registrar, under section 26 (2) of the Bihar Co-operative societies Act, 1935 on 1.8.88 to the following effect:- "provided also that no representative of the affiliated society having over 60% of its dues to the Bank as overdues shall be eligible to be elected as delegate, officebearer or Director of the Bank and if during holding of such office, the societys overdues exceed 60 per cent, of its dues to the Bank, the delegate shall cease to hold such office. " 3. The impugned proviso, thus, creates a new type of ineligibility. While the first proviso disqualifies the representatives/delegates of the affiliated societies or individual shareholders to seek election as Director of officebearer of the managing committee (Board of Directors) of the Bank or if they personally are defaulters or otherwise disqualified, the third proviso makes them ineligible if the affiliated society, which they represent, is defaulter to the extent of more than 60% of the dues to the Bank, even though personally they are not defaulters. Thus, two types of default and the consequential disqualification-One attached to the individual and the other attached to the affiliated society-are now provided. While in the case of former, the disqualification is absolute, that is, irrespective of the amount of dues or default, in the case of latter, it is so if the due exceeds 60%. In other words, if the due of the primary affiliated society is less than 60%, its representatives or delegates would not suffer from such disqualification. The proviso further provides that the delegates/representatives, in office, shall cease to hold office if during currency of their term the due to the Bank exceeds 60%. It is the validity of this new proviso which has come in for frontal challenge in the present writ-petition. 4. Before proceeding further in the matter, the hierarchy of the Agriculture creat. Co-operative Societies may be mentioned. There are primary societies at the block level. It is the validity of this new proviso which has come in for frontal challenge in the present writ-petition. 4. Before proceeding further in the matter, the hierarchy of the Agriculture creat. Co-operative Societies may be mentioned. There are primary societies at the block level. These primary societies are affiliated to the Central co-operative Bank at the district level and are its members. The district level societies, i. e. Central Co-operative banks, likewise are affiliated to Bihar state Co-operative Bank Limited at the state level. The district level Co-operative banks provide fund to the primary agricultural credit societies for disbursement of credit loan amongst their members, which is to be repaid to the Bank after recovery from the loaneex members according to the repayment schedule. 5. The substance of the grievance of the petitioners is that individual members of the affiliated societies, who are not defaulters, are sought to be deprived of their right to seek election to the District Level society, i. e. Central Co-operative Bank. The primary questions which arise for consideration, on the pleadings and submissions of the Counsel for the parties are- (1) Whether the Registrar, Cooperative societies, is competent to prescribe qualifications for seeking election as Directors and office-bearers of the Board of Directors, i. e. Managing committee of the Society, distinct from the qualification laid down under the bihar Co-operative Societies Rules, 1959 ?, and (ii) Whether the impugned proviso (to bye-law 29) is ultra vires the rules? 6. Before considering the merit of the contentions it would be appropriate at this stage to briefly notice the scheme envisaged in the Co-operative Societies act and the Rules regarding constitution of Managing Committee and qualification to membership etc. thereof. Sec.11 of the Act provides for registration of the Co-operative societies. In terms of Rule 15 the society is competent to make its own bye-laws, subject to the provisions of the Act and the Rules, which too requires registration by the Registrar under Sec.11. The Registrar, Cooperative Societies, however, is competent to amend the bye-laws under section 26 (1) if it appears to him that the amendment is necessary and desirable in the interest of such society. Sec.14 of the Act, inter alia, lays down that the management of the registered Co-operative Societies shall vest in the Managing Committee. The Registrar, Cooperative Societies, however, is competent to amend the bye-laws under section 26 (1) if it appears to him that the amendment is necessary and desirable in the interest of such society. Sec.14 of the Act, inter alia, lays down that the management of the registered Co-operative Societies shall vest in the Managing Committee. The procedure, mode and manner of election of members and office-bearers of the Managing Committee is contained in Rules 21-A to 21-X. Sec.28 of the Act confers right to vote upon members of the registered society provided they are not qualified to seek election under the rules, subject to number (of voters) as may be prescribed by the bye-laws. Sec.66 confers rule-making power upon the State Government and in particular, clause (viii) thereof empowers the State Government to make rules prescribing "the conditions under which a society may be prohibited from appointing a defaulting member of any society to its managing committee or to the managing committee of any other society and for allowing him to exercise his right of membership in the society or to represent it in another society. " rule 8 of the Rules lays down the eligibility as to the membership of society while Rules 23 to 25 contain provisions regarding eligibility/disability of members in the matter of election to the managing committee/cessation of membership, etc. 7. Mr. Yogendra Mishra, learned counsel for the petitioners, contended that the power to lay down the qualification for seeking election to the managing committee of the same society or another society vests in the State government in terms of Sec.66 (viii) of the Act and the Registrar had no such power to lay down the qualifications. According to the Counsel, no bye-law can be framed with respect to matters which are covered by the rule-making power of the State Government, particularly when the Government has already made rules. The qualification of the nature provided in the impugned proviso to the bye-law could be laid down by the State Government alone and not by the Registrar. On behalf of the intervenor, Mr. The qualification of the nature provided in the impugned proviso to the bye-law could be laid down by the State Government alone and not by the Registrar. On behalf of the intervenor, Mr. Ganesh Prasad singh referred to clauses (b) and (e) of rule 15 of the Co-operative Societies rules and contended that if the society is competent to make bye-laws regarding the qualification for admission to membership, its continuation, cessation and prescribe the consequence of default, the Registrar, Co-operative societies must also be held to be competent to do so in exercise of his powers under section 26 of the Act. 8. Rule 15 enables the registered co-operative Societies to make their own bye-laws; so far as relevant, the rule as follows: "16. Bye-laws of societies.- (1) A registered society shall subject to the provisions of the Act and these rules, make bye- laws in respect of the following among other matters, namely :- (d) the qualifications for admission to membership, the continuance of such membership and the continuance of such membership and the condition of cessation of or expulsion from membership; (e) the rights and liabilities of members, and the consequences of default in payment of any sum due by a member to the soicieyty. " Sections 26 (1) and (2) of the Act runs follows.- "26. Power of the Registrar to direct amendment of the Bye-laws of a registered society- (1) If it appears to the registrar that an amendment of the bye-laws of a registered society is necessary or desirable in the interest of such society, he may, by order in writing to be issued to the society, by registered post, require the society to make the amendment within such time as he may specify in such order. (2) If any society fails to make any such amendment within the time specified, the Registrar may, after giving the society an opportunity of being heard, register such amendment, certified by him, which shall be conclusive evidence that the amendment has been duly registered, and such amendment shall be binding on the members of such Society. " Sub-section (3) provides for appeal to the State Government against any order of the Registrar under sub-section (2 ). " Sub-section (3) provides for appeal to the State Government against any order of the Registrar under sub-section (2 ). Sec.26 of the Act leaves no room for doubt in my mind that the registrars power of making amendment in the Bye-laws extends to all matters or subjects covered by Rule 15 and he is thus competent to lay down not only the qualification for admission to memberships etc. but also the consequence of default. The clause "default in payment of any sum due by a member to the society" occurring in Rule 15 (1) (e)has to be given an extended meaning to mean "sum due by primary affiliated society to affiliating society" for the simple reason that primary societies are the constituent-members of the affiliating society. In other words, while in terms of Rule 15 (1) (e), the affiliating society (in the present case, Muzaffarpur central Co-operative Bank) can make bye-laws prescribing consequences of default in payment of any sum due by the primary societies to it, in terms of section 26 of the Act, the registrar can also direct amendment in the bye-laws to that effect. 9. Mr. Yogendra Mishra, however, contended that the State Government having framed rules as contained in rules 23,24 and 25 the field was already occupied and the Registrar, therefore, could not have laid down any qualification contrary to or in addition to the qualification already laid down by way of compulsory amendment of the bye-laws. I do not find any merit in this argument either. 10. The courts in India have had occasions to consider similar argument as to the field being occupied in the context of Article 254 of the Constitution of India. The Constitution provides for distribution of legislative powers between the Union and the States. The subjects over which the union and the states have exclusive legislative powers have been mentioned in List I and List ii, respectively, of the VIIth schedule. However, there are certain subjects, as mentioned in List III, over which both the unions and the States are competent to legislate. Controversy has arisen on various occasions as to the legislative competence where both the Unions and the States have made laws on the same subject. However, there are certain subjects, as mentioned in List III, over which both the unions and the States are competent to legislate. Controversy has arisen on various occasions as to the legislative competence where both the Unions and the States have made laws on the same subject. The Courts have interpreted that unless the two laws are found to be repugnant to each other, that is to say, inconsistent to the extent that they cannot stand together, it cannot be said that the field is occupied by the law made by either the Union or the State. 11. The question, therefore, arises for consideration, on analogy to the constitutional provisions, is whether there is any conflict or inconsistency between the Rules and the impugned bye-law to the extent that nothing left either to the society, in terms of its bye-law making power under Rule 15, or the registrar, in terms of bye-law amending power under Sec.26 to make/amend the bye-laws to lay down the qualification or consequence of default in the matter of seeking election to the managing committee or the society or that the impugned bye-law cannot stand with the rules. It would be appropriate to refer to the provisions of Rules 23, 24 and 25 in extenso at this stage :- "23. No persons shall be eligible for election, to the managing committee if- (1) he is not a member of the society; or (2) he is in default to the society in respect of any loan taken by him for such period as is prescribed in bye-laws or in any case for a period exceeding three months or is in default to the society in respect of any other dues or is in default to any other registered society on the date of the election ; or (3) he has directly or indirectly, any interest in any subsisting contract made with the society or in any property sold or purchased by the society or in any other transaction of the society, except in any investment made, in or any loan taken from the society; (4) any proceeding for surcharge or an inquiry relating to any transaction of the society is pending against him.24. A member of the managing committee shall cease to hold office, if- (1) he ceases to be member of the society, or (2) he incurs any of the disqualifications mentioned in rule 8 or rule 23.25. Disabilities of members.-A member srrall be disqualified for election as a representative of the society for any purpose if he suffers from any of the disqualifications for election as a member of the managing committee prescribed in rule 23 and a member shall cease to be representative of the society if, subsequent to his election as such, he becomes subject to any of the disqualifications prescribed in rule 24. " 12. From perusal of the above provisions it would appear that under rule 23 (2) a person becomes ineligible for election to the managing committee if he is defaulter to the same society in respect of any loan taken by him or defaulter to any other society on the date of election. Rule 24 provides for cessation of membership of such person who incurs any of the disqualifications mentioned in Rule 23 and Rule 8. Rule 25 renders him disqualified for election as representative of that society if he suffers from the disqualification which would disqualify him for election as member of the managing committee of the same society, and also for cessation as representative if he becomes subject to any disqualification under rule 24. A combined reading of the rules make it clear that where a person commits default vis-a-vis the same society of which he is a member or any other registered society on the date of election, amongst others, he becomes disqualified not only to seek election to the managing committee of that society but also as representative of that society and if he commits such default while in office as member or office-bearer, he ceases to hold office in that society or representative of that society. This is what the impugned bye-law also provides in substance. 13. We have already noticed the hierarchy of the Credit Co-operative societies. Mr. Ganesh Prasad Singh was at pains to point out that the status of primary affiliated societies vis-a-vis the district level society, i. e. Central cooperative Bank is that of member. This is what the impugned bye-law also provides in substance. 13. We have already noticed the hierarchy of the Credit Co-operative societies. Mr. Ganesh Prasad Singh was at pains to point out that the status of primary affiliated societies vis-a-vis the district level society, i. e. Central cooperative Bank is that of member. Just like an individual member who is disqualified to seek election as member or office-bearer of the managing committee of the same society under Rule 23 or to represent that society as its representative/delegate under Rule 25 if he commits default in payment of loan taken by him, where the default is committed by the affiliated society, the representative or delegate of that society would be disqualified to seek election as member or office-bearer of managing committee of the affiliating society, i. e. Central Co-operative Bank in the present case. The only distinctions is that while Rules 23, 24 and 25 contemplates default committed by the individual members, the impugned bye-law contemplates default by the affiliated society. But having regard to the relationship between the affiliated and the affiliating societies and there being no dispute about the fact that the affiliated societies are members of the affiliating society, the same provisions mutatis mutandis would be applicable. I find sufficient force in the submissions of the Counsel. 14. I, thus, do not see as to how the impugned proviso can be said to be in conflict or inconsistent with the rules. The submission that the field is occupied by the Rules has to be rejected. Had the bye-law provided the consequence of default in payment of loans by the members in a manner different from what the Rules provide the position might have been different. 15. I have held above that the registrar was competent to amend the bye-laws directing insertion of the third proviso to bye-law 29. It may be stated here that no argument was advanced by the Counsel for the petitioners as to whether the requisite conditions for exercise of powers by the Registrar under section 26 were made out or not. As noticed above, section 26 (1) of the Act empowers the Registrar to direct amendment where he is satisfied that such amendment is "necessary or desirable in the interest of the society. " i have however, considered this aspect of the matter. As noticed above, section 26 (1) of the Act empowers the Registrar to direct amendment where he is satisfied that such amendment is "necessary or desirable in the interest of the society. " i have however, considered this aspect of the matter. Having regard to the fact that the Co-operative Bank like any other financing institution, can run on the basis of liquid fund, and the fact that the finance provided by it to the primary societies by way of loan for disbursements amongst their members is not being repaid according to re-payment schedule, if the Registrar in order to ensure timely repayment of the loans and bring about financial discipline thought it necessary and desirable in the interest of the Co-operative Bank to amend the bye-laws, the exercise of power cannot be said to be unwarranted or against the interest of the society, i. e. the Central co-operative Bank. 16. As also noticed above, bye-law 29, as it stood prior to the amendment, contained disqualification clause to the effect that representatives/delegates of affiliated society or individual shareholders are made ineligible to seek election as a Director or office-bearer of the central Co-operative Bank if he is a defaulter or otherwise disqualified under the provisions of the Act, Rules or bye-laws in force. The said proviso has not been altered, only a new proviso has been added. It does appear, on first blush, that an individual should not be deprived of his right to seek election as office-bearer or member of the Managing committee of the affiliating society if he himself is not a defaulter. But on closer consideration the impression that one gets from the first reading does not appear to have any substance. If the affiliated society has not been able to adhere to the repayment schedule and is in default to the affiliating society, it is because of the collective acts/defaults committed by the individual members of that society. It is the duty of the members of the society to see it that defaulting members should clear the loans taken by them so that, in turn, the affiliated society may pay the instalments. In the prevailing circumstances, any measure to step up loan recovery and bring about financial discipline, must be said to have salutary purpose behind it. What the impugned proviso seeks to do is to make the members both severally and jointly liable. In the prevailing circumstances, any measure to step up loan recovery and bring about financial discipline, must be said to have salutary purpose behind it. What the impugned proviso seeks to do is to make the members both severally and jointly liable. The amendment, therefore, in my opinion, is in conformity with the provisions of section 26 of the Act. 17. I would, accordingly, answer both the questions formed for consideration in the negative. The registrar, Co-operative Societies, was not only competent but also justified in effecting the impugned amendment in the bye-laws, and the same cannot be said to be inconsistent with or ultra vires the Rules. 18. The other submissions made by mr. Mishra may also be noticed. He pointed out that in terms of section 14 (2) of the Act the managing committee is to be constituted in accordance with the rules and not in accordance with the bye-laws and, therefore, no bye-laws could be framed which would affect the constitution of the managing committee. He also mentioned that the rules as contained in Rule 21-A to Rule 21-X have been framed regarding the mode and manner of holding election of members and office-bearers of the managing committee. The submission is wholly out of place. What section 14 (2)contemplates is "constitution" of the managing committee which means the process of election, nomination, cooperation of the members and officebearers thereof. Bye-law 29 provides for composition of the managing committee. It is true that the provisos thereto lay down qualifications/disqualifications in the matter of election as director and office-bearers of the managing commitee but that is a matter separate and distinct from the mode and manner of constitution of the managing committee. 19. Mr. Yogendra Mishra also contended that fixing the limit of 60% and above for constituting default is arbitrary. According to him, there is no basis for fixing any cut-off. I do not understand as to how this kind of submission can be made on behalf of a defaulter affiliated society. If it is open to the competent authority to lay down that any default irrespective of the amount will disqualify the person from seeking election, making a provision to the effect that the default of 60% and above only shall constitute disqualification is certainly in the interest of such society and its members and, therefore, no grievance can be made on that score. Besides, in the present case, it appears from Annexure-2 which is a letter from the Registrar, Co-operative Societies, that there was also a basis for fixing the said limit. By the said letter the registrar called upon the Divisional commissioner, the District Magistrate and the Deputy Development Commissioners of the State to take steps for speedy loan recovery so that at least 40% of the outstanding loan may be recovered. In other words, perhaps, being conscious of the fact that it may not be possible to recover the entire amount of loan, the Registrar thought that at least 40% of it could be recovered. It was possibly for that reason that the impugned provision was made in the bye-laws to the effect that if the default exceeds 60%, i. e. the loan recovery is less than 40%, the affiliated society, will be considered to be defaulter and its representatives/delegates will be disqualified to seek election, I therefore, do not find any arbitrariness in fixing the limits. 20. Mr. Mishra also contended that after the voter list has been prepared and published, the Election Officer had no jurisdiction to stall the election process. Counsel referred to the judgment of the Supreme Court in R. Chandran V/s. M. V. Marappan, (1973 bbcj 369) in support of the contention that the election process cannot be interjected once it it has commenced. In the facts of the case, the submission has no substance. The letter of the Election officer does not amount to stalling of the election officer process. He merely sought the guidance of the District magistrate pointing out that the preparation of the voter list was not in accordance with law because persons who stand disqualified from being voter/candidate in terms of the amended bye-law have been included in the list. Besides, the writ-petition has been mainly argued on question of law regarding the validity of the amended bye-law and the jurisdiction of the registrar to frame the same. So far as the election process is concerned, the validity of the process has not been question in the present proceeding; therefore I do not think the submission has any relevance in this case. 21. In the result, I do not find any merit in the writ-petition, which is accordingly, dismissed, but without any order as to cost. Petition Dismissed.