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1998 DIGILAW 158 (HP)

NATHA SINGH v. STATE OF HIMACHAL PRADESH

1998-08-13

D.RAJU, LOKESHWAR SINGH PANTA

body1998
JUDGMENT D. RAJU, CJ.—The above writ petition has been filed seeking for the issue of a writ to quash the proceedings dated 14.7.1998 (a requisition for holding special meeting of the Board of Directors of the Bank) filed as Annexure PC and dated 18.7.1998 (the notice convening the meeting of the Board of Directors of the H.P. State Co-operative Agricultural and Rural Development Bank Ltd.) issued by the Managing Director of the Bank and filed as Annexure PE and consequently permit the Petitioner to work as the President of the 3rd Respondent-Bank for a complete tenure of four years and also for restraining Respondents 1 and 2 herein from interfering in the day-to-day functioning of the 3rd Respondent-Bank. 2. The relevant factual details for appreciating the grievance of the Petitioner are that the election process for the post of Director, Mandi District of HP. State Co-operative Agricultural & Rural Development Bank Ltd. Shimla, hereinafter referred to as the 3rd Respondent -Bank was conducted pursuant to the orders of the Registrar of Co-operative Societies dated 26.11.1997, in accordance with the prescribed procedure and the Petitioner was declared elected as the Director and a notification for the purpose was also issued on 15.1.1998. Thereupon the meeting of the Board of Directors of the 3rd Respondent-Bank was held on 23.3.1998 and the Director of the said Bank (both elected and nominated) participated in the same and the Petitioner was unanimously elected as the President of the 3rd Respondent-Bank for a term of 4 years in terms of Bye-law No. 37(a) of the Bank. The Petitioner claims that he was elected earlier as a member of the Legislative Assembly of Himachal Pradesh in 1984, that he was also a minister and elected Chairman of the 3rd Respondent-Bank twice before. It is stated that the Petitioner is the General Secretary of Indian National Congress and also a member of the All-India Congress Committee and during his earlier tenure the 3rd Respondent -Bank had been given special Trophy for making 100% growth of the Bank and the Bank was given a Trophy for making maximum recoveries. It is stated that the Petitioner is the General Secretary of Indian National Congress and also a member of the All-India Congress Committee and during his earlier tenure the 3rd Respondent -Bank had been given special Trophy for making 100% growth of the Bank and the Bank was given a Trophy for making maximum recoveries. The further stand of the Petitioner is that by invoking the powers of nomination of the Directors of the Bank Respondents No. 1 and 2 replaced some of the existing Directors by nominating four now Directors and thereafter contrary to the expectations of an assured term of four years, with the change in the ruling party of the State Government, the Respondents started interfering with the day-to-day administration of the 3rd Respondent-Bank, vindictively and with a mala fide and ulterior motives to achieve political ends they have initiated the impugned proceedings to dislodge the Petitioner by adopting unlawful means in order to bring into and instal their own person in the helm of affairs in gross violation of the provisions of the Act, rules and the Bye-laws 3. The Petitioner had also made reference in the petition to the relevant provisions of the Himachal Pradesh Co-operative Societies Act, 1968, some of the relevant rules and bye-laws to substantiate his claim that the Management of the affairs of the Bank vests with the general Body of Members of the Bank, that the Board of Directors of the Management Committee carries on the day-to-day functions and that there is no power conferred upon the Board of Directors or upon any one else for that matter to remove or dislodge a Chairman in office, duly elected, by passing any resolution expressing lack or want of confidence in him by the Directors of the Board and that therefore the entire proceedings are illegal, invalid and void and brought about on account of political bias and malice utilising the statutory functionaries for such nefarious purposes in gross abuse and misuse of power for selfish and political ends and objects. The stand taken for the Petitioner in the writ petition is also that the 3rd Respondent-Bank being State within the meaning of Article 12 of the Constitution of India, having regard to its pervasive control over the functioning of the Bank, the funding of the Bank by the Government and the public functions discharged by it in furtherance of the Directive Principles of State Policy and therefore, a writ could be maintained in this Court. The Petitioner also challenges the competency of the Managing Director to convene the meeting in question by issuing a notice dated 18.7.98 and that Rule 43 relied upon for the purpose is inappropriate and irrelevant and that the Petitioner had also strongly objected to the procedure adopted by the Managing Director in his representation dated 22.7.1998 and there is absolutely no scope for removing the Petitioner by the present mode adopted and the entire proceedings are without jurisdiction, opposed to the statute, rules and bye-laws governing the Bank in question. When the writ petition came up before Court for orders regarding admission, notice was ordered and having regard to the fact that the meeting convened was to be held on that very day when the writ petition was brought before the Court we allowed the meeting to go on but directed that the resolution, if any, passed therein, shall be kept in abeyance and will not be implemented till further orders are passed in the petition, with a further direction to post the petitions, main and miscellaneous, for final hearing with the consent of the parties on either side on 3.8.1998, with liberties to them to file their replies and rejoinders, if they choose to do so, in the meantime:— (a) The Respondents 1 & 2 filed their common reply raising preliminary objections to the maintainability of the writ petition both on the ground that the 3rd Respondent being a Co-operative Society, no writ lies against it and that at any rate the Petitioner had an effective alternative remedy under Section 72 of the H.P Co-operative Societies Act, 1968 and being a matter touching the business of the society, the grievance, if any, has got to be vindicated by having recourse to the said provisions only. On merits while contending that the meeting convened by the Managing Director, in the peculiar facts of the case is in accordance with law, it was also claimed that a body which has the power to elect the Chairman has the inherent power to remove the person by similar process and that in the meeting held on 27.7.1998 twelve out of Eighteen members-Board of Directors present and voted have passed a resolution expressing no confidence in the Petitioner and elected in his place a new Chairman with two-thirds majority, as evidenced by the proceedings dated 27.7.1998 filed as Annexure R-1 and if the Petitioner is to continue or allowed to function as the Chairman, inspite of the same, it will lead to chaos in Administration of the Board of Management and the affairs of the 3rd Respondent-Bank and that the decision taken as also the procedure followed is quite in accordance with Rule 45 read with Bye-law No. 39 (iii) of the Bank and, therefore, the writ petition has no merits and is liable to be dismissed. (b) It has been further stated for the Respondents that the authorised share capital of the Respondent-Bank is 6 crores out of which the State has provided Rs. 1,08,98,950 as on 31.3.1997 and Rs. 1,50,00,000 as share charges under long term operations up to 31.3.98, that inasmuch as the Petitioner as also one Mr. (b) It has been further stated for the Respondents that the authorised share capital of the Respondent-Bank is 6 crores out of which the State has provided Rs. 1,08,98,950 as on 31.3.1997 and Rs. 1,50,00,000 as share charges under long term operations up to 31.3.98, that inasmuch as the Petitioner as also one Mr. O.P. Nadda were elected as President and Vice-President (Chairman and Vice-Chairman) only by the Board of Directors of the 3rd Respondent in a Board meeting held on 23.3.1998, the same Board of Directors of the Bank is entitled to dislodge them and elect a new Head for the Board if they have lost the confidence of the Board and their continuance is prejudicial to the interests of the Bank and the tenure of four years will be subject to such eventualities as also the coming to an end of the term by other method of removal and resignation, too and that not only the Government is entitled to replace its nominee by fresh nomination under Section 35 of the Act but it is incorrect to claim that Respondents 1 and 2 have taken steps to remove the petitioner The right of the members of the Board to convene a special requisition meeting under Rule 48 of the Rules is reiterated, and it is also contended that the subsequent withdrawal of his name by one of the requisitionists is immaterial since he not only cannot do so but that even otherwise three Directors are competent also to serve the requisition in terms of Rule 48. The further plea on behalf of the Respondents is that Rule 44 read with Bye-law 39(i) has relevance in case of convening of ordinary and regular meeting but not to a requisition meeting and in such circumstances as the one concerning the President himself it is not necessary to obtain permission of the President and the Managing Director was well within his powers in convening the meeting pursuant to the requisition made by the prescribed number of Directors of the Board for the specific purpose of transacting the only business for which the requisition was made, while adverting to the fact that the 3rd Respondent society consist mostly of individual members with only few societies also as members, it is also reiterated that the entire expenditure of the Bank is borne out of its own resources and its functions are not like governmental functions and that there is no merit in the claim to seek coverage under Rule 43(3). In denying the allegations of mala fides and alleged abuse and misuse of power, it is stated that after the new Government came to power only one Government nominee was replaced in exercise of powers under Section 35(2) of the Act and contentions to the contrary are devoid of substance and merit. The plea that the Petitioner is sought to be removed on political grounds has been denied as incorrect and that the Managing Director was only obliged to as also bound to convene the meeting in question when the requisition demands for the same. The Respondents have also filed a copy of the resolution passed in the meeting held on 27.7.1998 as Annexure R-1 and it disclose that out of 18 members of the Board present and voting 12 members expressed their loss of confidence in the Petitioner to be the President and after electing a President for the days meeting the business was transacted and Shri Sher Singh Chauhan was elected as President in the place of the Petitioner by a overwhelming majority, as it is called, of 12 members. 4. The third Respondent also filed a separate reply and reiterated the preliminary objections as raised by the other Respondents regarding maintainability as also availability of alternative remedy. 4. The third Respondent also filed a separate reply and reiterated the preliminary objections as raised by the other Respondents regarding maintainability as also availability of alternative remedy. It is also contended therein that in the teeth of the representation of the petitioner, the Managing Director was obliged to seek for the instructions of the Registrar and he was also otherwise obliged as clarified by the Registrar to convene the requisition meeting, as demanded by the requisition and that no objection or exception could be taken to the action taken by him. This Respondent also denies the alleged deep and pervasive control by the Government in the administration of the Bank and that in furtherance of the principles of Democracy and Co-operative movement every decision is and has to be taken by the majority only in every Co-operative society. It is also stated that since the Petitioner was not elected as Chairman by the General Body of the 3rd Respondent Bank it is incorrect to contend that he can be removed only by the General Body and at any rate inasmuch the General Body elects the Board of Directors Zonewise, the collective will of the general body only is reflected by the Board in taking any decision and there is no right in law or otherwise for the Petitioner to claim to continue in office as Chairman despite loosing the confidence of the Board which elected him. The claim about the alleged violation of Principles of natural justice is also denied and it is stated that the claim for continuance in office by the Petitioner inspite of loosing the confidence of the Board which elected him will be contrary to the basic spirit of Co-operative movement, itself. Rule 43(1) is said to be not applicable to the case of the Petitioner since he has not been elected under Rule 38(1) (a) of the Rules. 5. Mr. Rajiv Sharma, learned Counsel appeared for the petitioner, whereas Mr. Sanjay Karol learned Advocate-General appeared for Respondents 1 and 2 and Mr. Suresh Bhardwaj appeared for Respondent No. 3. The learned Counsel appearing for the contesting parties reiterated the stand taken in their respective pleadings. 5. Mr. Rajiv Sharma, learned Counsel appeared for the petitioner, whereas Mr. Sanjay Karol learned Advocate-General appeared for Respondents 1 and 2 and Mr. Suresh Bhardwaj appeared for Respondent No. 3. The learned Counsel appearing for the contesting parties reiterated the stand taken in their respective pleadings. Shri Rajiv Sharma, learned Counsel for the Petitioner elaborately invited our attention to the various provisions of the Act, the rules and bye-laws governing the society and vehemently contended that (a) there is no power in the Board of Directors to dislodge or remove the Petitioner from office by expressing lack or want of confidence in the Petitioner (b) that the meeting of the Board could be convened only by the President and not by the Managing Director of the Society, (c) that if at all it is the general body of the Board which could remove the Petitioner from office under Rule 43(1) read with Bye-law 54 and not otherwise, (d) that even if there is power in the Board in the absence of proper procedure for the exercise of the same, there is no scope for exercising it, (e) that the statutory power vested in the authorities of the State has been exercised for improper purpose coupled with ulterior motives to remove some how the Petitioner because of his allegiance to Indian National Congress, (f) that the whole exercise undertaken smacks of bad faith and both factual and legal mala fides vitiates the exercise of power which according to the learned Counsel was not bona fide in this case and there has been violation of principles of natural justice and no opportunity was given to explain his stand. The learned Counsel while refuting the objection raised regarding maintainability of the writ petition urged that the Bank in question answers the description of State within the meaning of Article 12 of the Constitution and not only in this case the alternative remedy may not be effective but will not be fruitful also and consequently the Petitioner was rightly invoking the writ jurisdiction of this Court. 6. 6. Per contra, the learned Advocate-General with equal force and vehemence contended that the power to remove is available under Rule 43(3) and even in the absence of specific conferment of power, having regard to the nature of his office, the manner in which he got elected and the powers and duties he was obliged to discharge, it is inherent that he should vacate the office once the very Board which elected him expresses no confidence in him and resolves to elect some body else in his place failing which there cannot be any smooth running of the Administration of the business of the Society and chaos and stalemate detrimental to the institution and the general body of its members would otherwise result, that Rule 43(1) has no relevance and Rules 43(3) and 48 provides for the convening of the requisition meeting for a special purpose like the one in question and, therefore, there is no merit in the challenge made by the petitioner. It was specifically contended for the Respondents the word Appointment in Rule 43(3) would take within it the appointment of the Chairman or President which is by means of a selection by election and therefore Rule 43(3) applied to the case. The learned Advocate-General also strongly refuted the plea of abuse or misuse of power as alleged for any improper purpose or with mala fides legal or factual and that the risk inherent in every elected office by sheer vote of confidence to likewise express want of or lack of confidence cannot be dubbed as mala fide exercise of power and that except changing one nominee alone of the State, the authorities did not do anything in the matter and the accusation is baseless and untenable. The preliminary objections regarding the maintainability of the writ petition against a Co-operative Society and also about the existence of an effective alternative remedy and failure to exhaust the same disentitling the Petitioner from invoking jurisdiction under Article 226 of the Constitution was also reiterated. The preliminary objections regarding the maintainability of the writ petition against a Co-operative Society and also about the existence of an effective alternative remedy and failure to exhaust the same disentitling the Petitioner from invoking jurisdiction under Article 226 of the Constitution was also reiterated. The learned Counsel for the 3rd Respondent while adopting the submissions of the learned Advocate-General, supplemented the same by also urging additional reasons and contending that in the facts of the case the Managing Director had no other go but to convene the meeting of the Board in terms of the advise tendered by the Registrar of Co-operative Societies clarifying the legal position and no exception could be taken for the course of action adopted. 7. The learned Counsel on either side invited our attention to some of the judicial pronouncements as also to the relevant provisions of the Act, Rules and Bye-laws and we shall refer to them at the appropriate places when the issues pertaining to them are considered by us. We shall first take up for consideration the preliminary objections regarding the maintainability of the writ petition against a Co-operative Society in respect of what is claimed to be matter touching the business and internal management of the Society and also the existence and failure to exhaust effective alternative remedy disentitling the Petitioner to invoke the extra-ordinary jurisdiction of this Court under Article 226 of the Constitution of India. The reliance placed upon the decision reported in 1993 (2) S.LC, 243 (Chandresh Kumar Malhotra v. H.P State Co-op. Bank and others), is inappropriate. The decision in that case turned on the peculiar nature of grievance raised therein pertaining to a power exercised which was conferred under the Bye-laws of the Society and not of any statutory power. The mere contribution of some share capital by the Government and the exercise of control though supervisory but general in nature in the same manner like any other Society under the provisions of the H.R Co-operative Societies Act, 1968, referred to in this order as "the Act" and the Rules made there under cannot, in our view, constitute such effective and pervasive control as to make the 3rd Respondent-Bank answer the definition of State within the meaning of Article 12 of the Constitution of India. But, that by itself is not sufficient to come to the conclusion that a writ cannot be maintained against a Co-operative Society at all times and for any purpose. Their Lordships of the apex Court, had occasion often to declare, state and restate the principles of law in ever so many decisions rendered by them and it is, in our view, by now well settled that the exercise of powers under Article 226 of the Constitution of India would depend always upon the peculiar nature of the case and issues before Court also, and there cannot be any hard and fast rule of universal application and that if violation of any fundamental rights or contravention of any statutory provisions or mandate is made out, it matters very little as to the character or status of the violator, be it or he answers or not the definition of State within the meaning of Article 12 of the Constitution. In this case, the main grievance is that the action of the Respondents are opposed to the provisions of the Act and the statutory rules made there under and therefore, it is futile to contend that no writ can be maintained even in such case