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1996 DIGILAW 684 (PAT)

Bihar State Co-operative Fruits And Vegetable Marketing Federation Limited v. State Of Bihar

1996-10-10

M.Y.EQBAL

body1996
Judgment M.Y.Eqbal, J. 1. In the instant writ application, the petitioners have questioned the validity of the order dated 28th June, 1996 passed by the Register, Co-operative Society, Bihar, Patna whereby and whereunder the Bihar State Co-operative Fruits and Vegetable Marketing Federation Ltd. (hereinafter to be referred to as the Federation) has been ordered to be liquidated with the consent and approval of the State Government in purported exercise of power under Sec. 42 of the Bihar Co-operative Societies Act, 1935 (hereinafter to be referred to as the said Act). A copy of the said order issued vide Memo No. 5313 dated 28.6.1996 is filed and marked as Annexure-1 to this writ application. 2. Petitioner Nos. 2 to 10 are the representatives of the Co-operative Society affiliated to the Federation and the petitioner Nos. 4 to 10 are the Members of the Board of Directors of the Federation elected in the Special General Meeting held on 31st December, 1995. 3. The facts of the case are that the petitioner No. 1 the Federation is an apex Co-operative Society registered in 1989 and having jurisdiction over the whole State, except the sub-plan area. The Federation has its various objectives which are not relevant to be referred here for deciding the question in controversy. Suffice it to say that the Federation has been managing its affairs with the funds provided by its members in the shape of share money and deposits. The State Government or any body other than its members has not given any fund whatsoever. In other words, petitioners case is that the Federation is not a government aided Co-operative Institution like other Cooperative bodies of the State. The Federation is being managed by a Board of Directors consisting of 13 members of whom 10 are elected by and from amongst the members and the remaining 3, namely, the Register, Co-operative Societies, Bihar, the Director of Agriculture, Bihar and the Managing Director appointed by the State Government are exofficio members. The Chairman and the Vice Chairman are elected persons. According to the petitioners, the Federation right form the beginning has been trying to take up the activities in the light of the objectives mentioned above so that it can justify its existence and fulfil the purpose for which it was organised. The petitioners have mentioned in detail the investment and the detail of various Projects undertaken by the Federation. According to the petitioners, the Federation right form the beginning has been trying to take up the activities in the light of the objectives mentioned above so that it can justify its existence and fulfil the purpose for which it was organised. The petitioners have mentioned in detail the investment and the detail of various Projects undertaken by the Federation. It is alleged that the various Projects were submitted to the State Government for their onward transmission with recommendation and guarantee to N.C.D.C. but for the reasons best known to the authorities of the Co-operative Department, the schemes were not recommended by the Government and have been kept pending for years although several reminders were sent. It is further stated that despite no recommendation and non-sanction of the Schemes, the Federation through its own resources has been carrying out its activities since 1989-90 and the total business transacted by the Federation during this period is valued at Rs. 46.16 lacs. It is further stated that as a result of these transactions, the Federation earned a gross profit of Rs. 61, 670 in 1989-90. Rs. 2.45 lacs in 1990-91 and of Rs. 9000.00 in 1992-93. It is only after 1993 that the Federation has not earned any profit as it could not arrange funds for financing its activities. It is further alleged that repeated requests have been made for financial help right from the very beginning but no step was taken by the Co-operative Department. While the Management of the Federation was sincerely and painstakingly trying to rematerialise the Federation with the help of some practical measures, it received the impugned order like a bolt from the blue without any warning or prior intimation of the Register of the Co-operative Societies to liquidate the Federation. It is further stated that the reasons given in the impugned order for liquidation of the Federation are flimsy, incorrect and inappropriate. The petitioners also challenged the reasoning and the findings given in the impugned order and in support of that various documents have been filed and annexed to the writ applications. The petitioners, therefore, challenged the impugned order on various grounds, including the violation of principle of natural justice inasmuch as no notice whatsoever was given to the petitioner or petitioner Nos. 2 and 3 nor they were allowed any opportunity of being heard. 4. The petitioners, therefore, challenged the impugned order on various grounds, including the violation of principle of natural justice inasmuch as no notice whatsoever was given to the petitioner or petitioner Nos. 2 and 3 nor they were allowed any opportunity of being heard. 4. A counter affidavit has been filed on behalf of respondent Nos. 1 and 2 statement inter alia that the petitioners have come without availing the alternative remedy by way of appeal provided under Sec. 43 of the said Act and, therefore, this writ application is fit to be dismissed at the admission stage. It is further stated that the impugned order has been passed in accordance with the provisions of Sec. 42 of the Act which takes effect after expiry of two months from the date of publication of such order in the Official Gazette. It is further stated that the question of giving opportunity to the petitioners does not arise inasmuch as the petitioners can move to the State Government by way of appeal within two months from the date of publication of such order in the Official Gazette. With regard to the merits of the case, it is stated that the impugned order was passed on the basis of inspection and enquiry made under Secs. 34, 35 and 36 of the said Act. The inspection report reveals that the members of the Federation were not interested in running the Federation and, therefore, it was felt desirable to wind it up. The inspection report further reveals that the liability of the Societies outstrip its assets by over Rs. 20 lacs and the members of the Federation gave loans to the Federation on interest @ 14% but took loan from the Federation without any interest which resulted into a loss to the Federation of Rs. 2, 50, 000.00 which was increasing day by day. It is further stated that the departmental minister passed the order in administrative capacity whereas in terms of Sec. 43, appeal lies before the Court of Minister, Co-operation in judicial capacity. 5. Mr. Azfar Hasan, learned Counsel appearing on behalf of petitioners made a very aggressive argument and challenged the impugned order on various grounds as being illegal and wholly without jurisdiction. 5. Mr. Azfar Hasan, learned Counsel appearing on behalf of petitioners made a very aggressive argument and challenged the impugned order on various grounds as being illegal and wholly without jurisdiction. The learned Counsel submitted that petitioner No. 1 being a legal person ought to have been given an opportunity to defend itself before the impugned order was passed by the respondent authorities. The learned Counsel further submitted that the impugned order is arbitrary, illegal and void on the ground that before it was passed the members of the Federation, including petitioner Nos. 2 and 3 and the members of the Board of Directors of the Federation were not allowed any opportunity of being heard. On the question of discrimination, the learned Counsel submitted that several apex Co-operative Institutions like the Federation have become defunct since long with their liabilities, yet no action has been taken against those Federations. The learned Counsel then submitted that the impugned order was not passed on the basis of full fledged enquiry of the affairs of the Federation under Sec. 35 of the said Act but only on inspection done about a year ago which does not reflect the actual position is its entirety. 6. On the other hand the learned Government Advocate firstly raised a preliminary objection and submitted that the petitioners have not come to this Court after exhausting the statutory remedy of appeal provided under the said Act and, therefore, this Court should not exercise its discretion under Articles 226 and 227 of the Constitution. The learned Counsel then submitted that Section 42 of the said Act does not contemplate the compliance of the principles of natural justice inasmuch as the order passed under Sec. 42 of the said Act is always based on the report of inspection and enquiry and not on the basis of personal hearing. 7. Before appreciating the rival contentions made by the learned Counsel appearing for the parties. It is worth to be looked into the relevant provisions of the said Act. Chapter-VI of the said Act lays down the provisions of dissolution of the Managing Committee which consists of Secs. 41 to 44. The relevant portion of Sec. 41 is quoted hereinunder: Sec. 41. It is worth to be looked into the relevant provisions of the said Act. Chapter-VI of the said Act lays down the provisions of dissolution of the Managing Committee which consists of Secs. 41 to 44. The relevant portion of Sec. 41 is quoted hereinunder: Sec. 41. Dissolution of Managing Committee.- (1) If, in the opinion of the Register, the Managing Committee of any registered society is mismanaging the affairs of the registered society or has failed to sufficiently improve the affairs of the registered society or is persistently making default or is negligent in the performance of the duties imposed on it by this Act, the Rules or the bye-laws, he may, by order in writing after giving the Managing Committee an opportunity to state its objections, if any, dissolve the Managing Committee for any period not exceeding six months and order that all or any of its member shall be disqualified from being elected to the Managing Committee of the registered society for a period to be specified in the order not exceeding three years: Provided that the Register, in special circumstances, by recording the reasons in writing and with the prior approval of the State Government, shall extend the period of dissolution for such further period as may be considered necessary by the State Government. Every order of the Register under this Sub-sec. shall state the reasons for which it is made and shall be communicated by registered post to the registered society concerned. (2) Where the Register while proceeding to take action under Sub-sec. (1) is opinion that suspension of the Managing Committee is necessary in the interest of the registered society, he may suspend the Managing Committee which shall thereupon cease to function and make such arrangement as he thinks proper for the management of the affairs of the registered society till the proceedings under Sub-sec. (1) are completed: Provided that if the Managing Committee so suspended is not dissolved it shall be reinstated and the period during which it has remained suspended shall count towards its terms. (3)... (4)... (5)... (6)... (7)... (8)... Sec. 42 of the said Act lays down the provisions for winding up of the Society which reads as follows: Sec. 42. (1) are completed: Provided that if the Managing Committee so suspended is not dissolved it shall be reinstated and the period during which it has remained suspended shall count towards its terms. (3)... (4)... (5)... (6)... (7)... (8)... Sec. 42 of the said Act lays down the provisions for winding up of the Society which reads as follows: Sec. 42. Winding the order.- The Register may, by notification, order a registered society to be would up if- (a) after an enquiry has been held under Sec. 35 or an inspection made under Sec. 34, Sec. 36 or Sec. 37, or on receipt of an application made by three fourth of the members of the society, of his own motion in the case of a society that has not commended working or has ceased working, he is of opinion that the society ought to be dissolved, or (b) it is a condition of the registration of the society that it should consist of at least ten members who have attained the age of eighteen years and it is proved to the satisfaction of the Register that the number of members has been reduced to less than ten. The provision for appeal against the order passed under Sec. 42 is provided under Sec. 43 of the said Act which reads as under: Sec. 43: Appeal against the order of winding up:- (1) Any member of a society in respect of which an order under Sec. 42 has been passed may, within two months from the date of the publication of such order in the official Gazette appeal to the State Government from such order. (2) An order under Sec. 42 shall not take effect until the expiry of two months from the date of the publication of such order in the official Gazette or, if an appeal be preferred, unless and until it is confirmed by notification on appeal. (3) The order of the State Government on appeal and, subject to the result of such appeal, if any, the order of the Register shall be final. Sec. 44 of the said Act lays down the procedure to be followed in consequence of the liquidation and dissolution of the Society which is not relevant to be quoted. 8. (3) The order of the State Government on appeal and, subject to the result of such appeal, if any, the order of the Register shall be final. Sec. 44 of the said Act lays down the procedure to be followed in consequence of the liquidation and dissolution of the Society which is not relevant to be quoted. 8. From the perusal of the provisions of the said Act it appears that in case of dissolution of the Managing Committee of the Society Sec. 41 contemplates prior notice and opportunity of hearing, save and except under particular circumstances where given of notice may frustrate the purpose of taking such action. From the plain reading of Sec. 42 of the said Act it appears that it does not contemplate any prior notice and opportunity of hearing. The question now arose as to whether it would be necessary for the Register to afford an opportunity to show cause before such a harsh action is taken as it would be violative of principles of natural justice and fair play. This question is no longer res integra inasmuch as it has been settled by a catena of decisions that such an action will be violative of the principles of natural justice. 9. It cannot be disputed that such an order of liquidation of the Society would definitely visit the Society and the person concerned with civil consequences and, therefore, the question that falls for consideration is whether prior notice and opportunity of hearing is implied in the said provision. 10. A similar question arose before the apex Court in Smt. Maneka Gandhi V/s. Union of India and Anr. reported in -- wherein their Lordships held as under: Para-57: The question immediately arises does the procedure prescribed by the Passports Act, 1967 for impounding a passport meet the test of the requirement? Is it right or fair or just? The argument of the petitioner was that it is not because it provides for impounding of a passport without affording reasonable opportunity to the holder of the passport to be heard in defence. To impound the passport of a person, said the petitioner, is a serious matter, since it prevents him from exercising his constitutional right to go abroad and such a drastic consequence cannot in fairness be visited without observing the principle of audi alterm pattern. To impound the passport of a person, said the petitioner, is a serious matter, since it prevents him from exercising his constitutional right to go abroad and such a drastic consequence cannot in fairness be visited without observing the principle of audi alterm pattern. Any procedure which permits impairment of the constitutional right to go abroad without giving reasonable opportunity to show cause cannot but be condemned as unfair and unjust and hence, there is in the present case clear infringement of the requirement of Article 21. Now, it is true that there is no express provision in the Passports Act, 1967 which requires that the audi alteram partem rule should be followed before impounding a passport, but that is not conclusive of the question, if the statute makes it self clear on this point, then no more question arises. But even when the statute is silent, the law may in a given case make an implication and apply the principle stated by Byles, J., in Cooper V/s. Wandsworth Board of Works, (1863) 14 C.B.N.S. 180: "A long course of decisions beginning with Dr. Bentleys case (1723) 1 Str. 557 and ending with some very recent cases, establish that although there are no positive words in the Statutes requiring that the parties shall be heard, yet the justice of the common law will supply the omission of the legislature". The principle of audi alterm partem which mandates that no one shall be condemned unheard, is part of the rules of natural justice. In fact, there are two main principles in which the rules of natural justice are manifested, namely. Nemo Judex in Sua Causa and audi alteram partem. We are not concerned here with the former since there is no case of bias urged here. The question is only in regard to the right of hearing which involves the audi alterm partem rule. Can it be imported in the procedure for impounding a passport? In D.K. Yadav V/s. JM.A. Industries Ltd., reported in 1994 (1) PLJR (SC) 55, this question has again been set at rest by the apex Court by holding as under: Para-9: It is a fundamental rule of law that no decision must be taken which will affect the right of any person without first being informed of the case and giving him/her an opportunity of putting forward his/her case. An order involving civil consequences must be made consistently with the rules of natural justice. In Mohinder Singh Gill V/s. Chief Election Commissioner, 1978 2 SCR 272 , the Constitution Bench held that civil consequences over infraction of not merely property or personal right but of civil liberties, material deprivations and non-pecuniary damages. In its comprehensive connotation every thing they affects a citizen in his civil life inflicts a civil consequences. Blacks Law Dictionary, 4th Edn. Page 1487 defined civil rights are such as belong to every citizen of the State or country.....they include rights capable of being enforced or redressed in a civil action. In State of Orissa V/s. (Miss) Binapani Dei, (1967) 2 SCR 625 this Court held that even an administrative order which involves civil consequences, must be made consistently with the rules of natural justice. The person concerned must be informed of the case, the evidence in support thereof supplied and must be given a fair opportunity to meet the case before an adverse decisions is taken. Since to such opportunity was given, it was held that superannuation was in violation of principles of natural justice. Para-11: The law must therefore be now taken to be well-settled that the procedure prescribed for depriving a person of livelihood must meet the challenge of Article 14 and such law would be liable to be tested on the anvil of Article 14 and the procedure prescribed by a statute or statutory rule or rules or orders, affecting the civil rights or result in civil consequences would have to answer the requirement of Article 14 . So it must be right, just and fair and not arbitrary, fanciful or oppressive. There can be no distinction between a quasi-judicial function and an administrative function for the purpose of principles of natural justice. The aim of both administrative enquiry as well as quasi judicial enquiry is to arrive at a just decision and if a rule of natural justice is calculated to secure justice or to put it negatively, to prevent miscarriage of justice, it is difficult to see why it should be applicable only to quasi judicial enquiry and not to administrative enquiry. It must logically apply to both. In K.I. Shephard and Ors. V/s. Union of India and Ors. It must logically apply to both. In K.I. Shephard and Ors. V/s. Union of India and Ors. -- , the Apex Court rejecting the submission that the rules of natural justice have been ousted by necessary implication held as under: Para-15: Fair play is a part of the public policy and is a guarantee for justice to citizens. In our system of rule of law, every social agency conferred with power is required to act fairly so that social action would be just and there would be furtherance of he well-being of citizens. The rules of natural justice have developed with the growth of civilization and the content thereof is often considered as a proper measure of the level of civilization and rule of law prevailing in the community. Man within the social frame has struggled for centuries to bring into the community the concept of fairness and it has taken scores of years for the rules of natural justice to conceptually enter into the filed of social activities. We do no think in the facts of the case there is any justification to hold that rules of natural justice have been ousted by necessary implication on account of the time frame. On the other hand we are of the view that the time limited by statute provides scope for an opportunity to be extended to the intended excluded employees before the scheme is finalised so that a hearing commensurate to the situation is afforded before a section of the employees is thrown out of the employment. 11. Coming to the instant case, admittedly, before passing the impugned order, neither a copy of the inspection report or any other report which was the basis for passing such order was served upon the petitioners nor the petitioners were given an opportunity of hearing before the said order was passed. In that view of the matter, I have no hesitation in holding that the impugned order is violative of the principles of natural justice inasmuch as, according to me, entitlement of notice and opportunity of hearing is implicit the said provision of the Act. In other words, if the Register proposed to pass an order of winding up, the Society or the concerned office bearers must be informed about the reasons or the grounds on which the Register proposed to make such an order. In other words, if the Register proposed to pass an order of winding up, the Society or the concerned office bearers must be informed about the reasons or the grounds on which the Register proposed to make such an order. In absence of such opportunity, the impugned order cannot be sustained in law. I therefore, hold that the impugned order passed by the Register. Co-operative, Society is bad in law and is violative of the principles of natural justice. 12. The second question that arose for consideration is as , to whether this Court can exercise its power under Article 226 of the Constitution of India, when an appropriate remedy by way of appeal is available to the petitioners. It has been extraneously argued by the learned Counsel appearing on behalf of respondents that the petitioners may agitate all the points before the appropriate forum available under Sec. 43 of the Said Act." 13. No doubt when the statutory remedy is available, this Court should be reluctant to interfere under Article 226 of the Constitution of India but in the instant case the order suffers from serious defect in procedure besides, it being violative of principles of natural justice. It is well settled that when the order is violative of the principles of natural justice, it goes to the root of the matter rendering the final order void and, therefore, the party or the person concerned need not be relegated to the alternative remedy. In State of U.P. V/s. Mohammad Nooh A.I.R. 1958 SC 86, the Apex Court held as under: Para-11: On the authorities referred to above, it appears to us that there may conceivably be cases and the instant case is in point-where the error, irregularity or illegality touching jurisdiction or procedure committed by an inferior court or tribunal of first instance is so patent and loudly obstrusive that it leaves on its decisions an indeliable stamp of infirmity or vice which cannot be obliterated or cured on appeal or revision. If an inferior Court or tribunal of first, instance acts wholly without jurisdiction or patently in excess of jurisdiction or manifestly conducts the proceedings before it in a manner which is contrary to the rules of natural justice and all accepted rules of procedure and which offends the superior Courts sense of fair play, the superior Court may, we think, quite properly exercise its power to issue the prerogative writ of certiorari to correct the error of the Court or tribunal of first instances, even if an appeal to another inferior Court or tribunal was available and recourse was not had to it or if recourse was had to it, it confirmed what ex facie was a nullity for reasons aforementioned. This would be so all the more if the tribunals hearing the appeal or revision were merely departmental tribunals composed of persons belonging to the departmental hierarchy without adequate legal training and background and whose glaring lapses occasionally come out to our notice. The Superior Court will ordinarily decline to interfere by issuing certiorari and all we say is that in a proper case of the kind mentioned above it has the power to do so and may and should exercise it. We say no more than that. 14. For the reasons aforesaid, this writ application is allowed and the impugned order dated 28th June 1996 passed by the Register Co-operative Societies as contained in Annexure-1 to the writ application is hereby quashed. 15. Before parting with the judgment, it is made clear that this order will not debar the respondent authorities to proceed afresh under Sec. 42 of the said Act in accordance with law. 16. There shall be no order as to costs.