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2000 DIGILAW 204 (KER)

Joint Registrar of Co-op. Societies v. Syed

2000-03-30

ARIJIT PASAYAT, K.K.USHA, K.S.RADHAKRISHNAN

body2000
Judgment :- Arijit Pasayat, C.J. Doubting correctness of view expressed by a Division Bench of this Court in Padmanabhan v. Joint Registrar (1995 (1) KLT 630), following question has been referred to a Larger Bench for opinion: Whether Clause 36A of the Bye-laws of the Bank, which permits co-option, can be operative notwithstanding the specific provisions in R.38(5) of the Kerala Co-operative Societies Rules as to the manner in which the vacancies have to be filled up? The question has to be considered in the light of S.110(2) of the Kerala Co-operative Societies Act,' 1969 (in short, the act). 2. Dispute arose in the following background: Respondent Syed was elected as President of the Kumarampathur Service Co-operative Bank Ltd. (hereinafter referred to as the Bank). Election to the Managing Committee was conducted and the term of office of the Managing Committee was to expire in February 2000. Nine members were elected to the Managing Committee, out of whom five members sent letters of resignation to the Joint Registrar of Co-operative Societies. An Administrator was appointed by order dated 13.7.1999. Respondent Syed filed O.P. No. 19791 of 1999 challenging appointment of the Administrator. By judgment in the said Original Petition, order of appointment was quashed on the ground that there was no valid resignation. Against the said judgment, Writ Appeal was filed, but no stay was granted. Subsequently, five persons, who had sent letters of resignation earlier, again sent such letters under R.38 of the Kerala Co-operative Societies Rules, 1969 (in short, the rules). Respondent Syed convened a meeting of committee on 27/12.1999 to consider the acceptance of the resignation letters, which were tendered on 21.12.1999. According to Syed, when the meeting commenced, at about 2.00 p.m., a large number of policemen, headed by Circle Inspector of Police, Mannarked, came to the bank without any justifiable cause. After discussions, at about 2.45 p.m., the resignations were accepted. Remaining members, four in number, thereafter convened a meeting in terms of Cl. 36A of the Bye-laws of the Bank, which provides that in the event of a vacancy in the board, remaining members can co-opt member(s) for the remaining period to fill up the vacancy/vacancies, as the case may be. Therefore, a resolution was passed by the members present in terms of said clause in the Bye-laws, co-opting two members for the remaining period. Therefore, a resolution was passed by the members present in terms of said clause in the Bye-laws, co-opting two members for the remaining period. In the meantime, minutes of the Bank were taken away by the police and handed over to the Secretary without permitting Syed to note the minutes of the meeting, under which co-option of two members was made. On 28.12.1999, a meeting of the newly formed committee, which had a quorum to hold the meeting, passed a resolution requesting the Assistant Registrar of Co-operative Societies to take steps to hold elections to the Managing Committee immediately. But, without noticing the resolution, an order was brought to the society at about 4.00 p.m. appointing the Unit Inspector, office of the Assistant -Registrar, Mannarkad as Administrator of the bank. Said Administrator was accompanied by a group of about 50 persons when he took over. Challenge was made to the appointment of said Administrator in O.P. No. 32864 of 1999. The Joint Registrar took the stand that after acceptance of resignation of five members, the Managing Committee lost its quorum. This aspect was noticed by the Assistant Registrar also, who informed the Joint Registrar. To avoid administrative stalemate and inconvenience, part-time Administrator was appointed. Power under S.33(1) of the Act was invoked to prevent continuance of a committee which had no legal sanction to continue in the absence of a quorum. To meet the urgent situation, publication of notice and calling for objections were dispensed with, as it was felt that any delay in appointment of the Administrator would amount to permit continuance of a committee without quorum. After issuance of order in this regard, copy of resolution regarding co-option of two persons as members was received. Since such action was not considered legal, due intimation was given to Syed, in that regard. The five persons, who had tendered resignation, filed a counter denying certain allegations made. 3. By impugned judgment, learned single judge held that action under S.33(1) was illegal. Administrator was directed to hand over charge to the existing committee. Learned single judge held that by operation of S.110(2)(ii) of the Act, Cl. 36A of the Bye-laws has effect, and co-option could be done. It was also observed that though R.38(5) prescribes the mode of filling up of the vacancies, that does not have any effect, in view of clause 36A and, therefore, the co-option was in order. Learned single judge held that by operation of S.110(2)(ii) of the Act, Cl. 36A of the Bye-laws has effect, and co-option could be done. It was also observed that though R.38(5) prescribes the mode of filling up of the vacancies, that does not have any effect, in view of clause 36A and, therefore, the co-option was in order. Reliance was placed in Padmanabhan's Case (Supra) to hold that the Bye-laws are not inconsistent with any of the provisions in the Act and therefore, notwithstanding the existence of R.38(5), co-option could be done. It was further observed that R.38(5) only foresees situations when vacancies arise due to resignation. In case of death or disqualification, remaining members are not prevented from exercising the power under Clause 36A and, therefore, action in appointing Arbitrator was not in order. It was further held that while exercising power under Cl. 36A, quorum need not be there. 4. Said judgment is the subject-matter of the Writ Appeal. As indicated above, correctness of the view expressed in Padmanabhan's case (supra) was doubted and," therefore, the reference has been made. 5. Learned counsel for appellants submitted that Padmanabhan's case (supra) has not been correctly decided as the effect of the Rules which are framed under S.109 of the Act has been lost sight of. They are to be treated as part of the Act in the absence of any intention to the contrary expressed in the Act. The view that S.28(5), which prescribes a quorum is not applicable to clause 36A of Bye-laws, is clearly untenable. Further, learned Single Judge proceeded as if- R.38(5) only foresees situations when vacancies arise due to resignation. Amendment to the provision in 1992 has "been lost sight of. Stand that Bye-law 36A is not in consistent with any provisions in the Act, though may be at variance with the Rules is not acceptable as statutory rules are to be read as part of the Act. 6. Learned counsel for respondent "Syed, on the other hand, submitted that the Rules have separate existence from the Act and the legislative wisdom is reflected in S.110(2) vis-a-vis applicability of bye-laws. Inconsistency with Rules, if any, does not affect applicability of Bye-laws. Even otherwise, there is no quorum required for a meeting where co-option is to be made. Reliance is placed on a decision of the Apex Court in Hotel Balaji & Qrs. Inconsistency with Rules, if any, does not affect applicability of Bye-laws. Even otherwise, there is no quorum required for a meeting where co-option is to be made. Reliance is placed on a decision of the Apex Court in Hotel Balaji & Qrs. v. State of A.P. & Ors. (1993 Supp. (4) SCC 536) to contend that Rules whenever inconsistent with the Act have to give way and cannot be said to be a part of the Act unless it is made clear that the Rules on being made shall be deemed to be as if enacted in the Act. 7. At this juncture, it is necessary to take note of the relevant provisions in the Act, Rules and the Bye-laws. They read thus: "S.28. Appointment of committee:-(1) (5) The quorum for a meeting of a committee shall be such number of members' just above fifty per cent of the total number of members of that committee." "S.109. Power to make rules:- (1) The Government may, for the whole or any part of the State and for any class societies, after previous publication, by notification in the Gazette, make rules (either prospectively or retrospectively by) to carry out the purposes of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: xxxx xxxx (xi) The election of members of the committee by the general body of a society; xxxx xxxx xxxx "S.110(2):- Notwithstanding the repeal of the Madras Co-operative Societies Act, 1932 and the Travancore Cochin Co-operative Societies Act, 1951 and without prejudice to the provisions of Ss.4 and 23 of the Interpretation and General Clauses Act, 1125 (VII of 1125): (i) xxx xxx xxx (ii) any society existing in the State on the date of commencement of this Act which has been registered or deemed to be registered under any of the aforesaid repealed Acts shall be deemed to be registered under the Act, and the bye-laws of such society shall, so far as they are not inconsistent with the provisions of this Act, continue in force until altered or rescinded." "R.38. Constitution of Committee, resignation xxx xxx (5) Casual vacancy of an elected member of the committee shall be filled up by election in the manner provided in the Rules. Constitution of Committee, resignation xxx xxx (5) Casual vacancy of an elected member of the committee shall be filled up by election in the manner provided in the Rules. In the case of nominated members, the vacancies will be filled up by fresh nomination subject to the provisions in R.37. English translation of Bye-law 36A:- "If any vacancy arises unexpectedly among elected directors, remaining members of the board can co-opt". 8. It is a well known and accepted principle while interpreting a statute that Rules made under the Statute are to be treated, for the purpose of construction, as if they were in the enabling Act and are to be of the same effect as if contained in the Act. This position was stated by Apex Court in State of U.P. v. Babu Ram (AIR 1961 SC 751 at p. 761). In said case, Apex Court relied on a passage from Maxwell "On the Interpretation of Statute" and held that a rule framed in the absence of any specific provision in the Act shall be deemed to be a part of the Act itself. In State of Tamil Nadu v. M/s. Hind Stone (AIR 1981 SC 711), aforesaid dictum, in the case of Babu Ram (supra), was relied upon. The position was again reiterated in M/s. Video Electronics Pvt. Ltd. & Ann v. State of Punjab & Ann (AIR 1990 SC 820). The Apex Court in Kailash Nath v. State of U.P. (AIR 1957 SC 790) held that the notification having been made in accordance with the power conferred by the Statute has statutory force and validity, and exemption is as if contained in the Act itself. It was observed that the U.P. Sales Tax Act by S.24(4) confers rule making powers on the State Government. S.25 confers powers on the State Government to issue notification. Hence it cannot be disputed that the exemption notification is the exercise of the legislative power. Rules made under the Statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and have the same effect as if contained in the Act and are to be judicially noticed for all purposes of construction or obligation. Statutory rules made pursuant to the power entrusted by Parliament/State Legislature are law made by Parliament/State Legislature. Statutory rules made pursuant to the power entrusted by Parliament/State Legislature are law made by Parliament/State Legislature. To hold otherwise would be to ignore the complex demands made upon modern legislation which necessitate the plenary legislating body to discharge its legislative function by laying down broad guidelines and standards, to lead and guide as it were, leaving it to the subordinate legislating body to fill up the details by making necessary rules and to amend the rules from time to time to meet unforeseen and unpredictable situation. The position was again reiterated by Apex Court in Peerless General Finance & Investment Co. Ltd. & Ann v. Reserve Bank of India (AIR 1992 SC 1033 at page 1059). There can be no quarrel with the position that rules are to be consistent with the provisions of the Act and if a rule goes beyond what the Act contemplates, the rule must yield to the Act. There is what was stated by Apex Court in Hotel Balaji's case (supra) relied upon by learned counsel for Syed. But the position is contextually different in the present case. The statutory rules under the powers conferred by an Act become integral part of the Act. The position was stated illuminatingly in Babu Ram's case (supra) as follows: 1124 Mese decisions and the observations made therein could not be understood to mark a radical departure from the fundamental principle of construction that rules made under a statute must be treated as exactly as if they were in the Act and are of the same effect as if contained in the Act. There is another principle equally fundamental to the rules of construction, namely, that the rules shall be consistent with the provisions of the Act " 9. It has to be further noted that R.38(5) has undergone a change in 1992. After the change, the provision not only deals with a situation when vacancies arise due to resignation, but also due to other contingencies like death, disqualification, etc. The amended provision does not appear to have been brought to the notice of learned Single Judge. S.28(5) deals with the quorum required for every meeting. The provision sets down in no uncertain terms about the minimum number of members need to be present to constitute the quorum. The amended provision does not appear to have been brought to the notice of learned Single Judge. S.28(5) deals with the quorum required for every meeting. The provision sets down in no uncertain terms about the minimum number of members need to be present to constitute the quorum. In the absence of a quorum, there cannot be a validity constituted meeting and to that extent also, there is conflict between clause 36A of the Bye-laws and the provisions contained in the Act. The latter has undisputedly to prevail. The provision imposes a mandatory requirement by using the word "shall". The use of word "shall" raises a presumption that the particular provision is imperative, but this prima facie inference may be rebutted by other considerations such as object and scope of the enactment and the consequences flowing from such construction. As was observed in Babu Ram's case (supra), when a statute uses the word "shall", prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature, the Court may consider, inter alia, the nature and the design of the statute, and the consequences which would flow from construing it one way or the other, the impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstances that the statute provides for a contingency of the non-compliance with the provision, the fact that the non-compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow there from, and above all whether the object of the legislation will be defeated or furthered. 10. Above being the position, the conclusion in Padmanabhan's case (supra) to the effect that notwithstanding the inconsistency of Clause 36A of Bye-laws to R.38(5), the former shall prevail as it is not inconsistent with any provisions in the Act is indefensible. 11. Our answer to the reference, therefore, is that the power of co-option under clause 36A of the Bye-laws cannot be exercised in a manner different from what is prescribed in R.38(5) of the Rules, along with S.28(5) of the Act.