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2002 DIGILAW 670 (GUJ)

LAXMIDAS KURJIBHAI v. DISTRICT REGISTRAR

2002-09-03

P.B.MAJMUDAR

body2002
P. B. MAJMUDAR, J. ( 1 ) PETITIONERS 1 to 8 as well as one Karamshibhai Gordhanbhai (since deceased), represented by his heirs and legal representatives, were the members of Vanthli Seva Sahkari Mandli Limited, Vanthli, Junagadh. ( 2 ) RESPONDENT No. 1 instituted an enquiry against the petitioners under the provisions of Section 93 of the Gujarat Cooperative Societies Act, 1961 and appointed respondent No. 2 as Enquiry Officer for the purpose of making report in respect of the charges levelled against the petitioners. The petitioners were subjected to enquiry on the ground that the petitioners gave to the members, Bonus, called "sabhasad Maal Bonus", whereby the society suffered financial loss for which the petitioners were prima facie held to be liable. ( 3 ) THE petitioners were subjected to show cause notice under the provisions of Section 93 of the Act. The petitioners denied the charges by pointing out that on the basis of the Resolution passed in the General Body, it was decided to distribute "sabhasad Maal Bonus", to all the members and, there was no intention to misappropriate or misapply any fund of the society and that the said distribution is by way of incentives under Section 66 of the Act and that the entire action is approved by the General Body in its Annual General Meeting. ( 4 ) THE Enquiry Officer, after conducting the aforeaid enquiry, submitted his report. He came to the conclusion that there is no provision in the Act or even in the byelaws to distribute bonus to the members. He also came to the conclusion that the expenditure in question is not an administrative expenditure and that there is a misapplication of the funds of the Society. The Enquiry Officer accordingly came to the conclusion that there is a loss to the Society to the extent of Rs. 50,000. 00 and accordingly, held that the petitioners are responsible to make good the aforesaid amount of RS. 50,000. 00 to the Society and that the said amount can be recovered under the provisions of the Land Revenue Code or by way of civil proceedings. ( 5 ) THE present petitioners, thereafter, carried the matter by way of appeal before the Cooperative Tribunal, challenging the aforesaid order of the Investigating Officer. 50,000. 00 to the Society and that the said amount can be recovered under the provisions of the Land Revenue Code or by way of civil proceedings. ( 5 ) THE present petitioners, thereafter, carried the matter by way of appeal before the Cooperative Tribunal, challenging the aforesaid order of the Investigating Officer. The Tribunal came to the conclusion that the alleged distribution of profit, though not mala fide, since it is approved by the General Body of the Society in its Annual General Meeting; yet, the same is illegal and, therefore, there is a misapplication of fund and that the finding of the Investigating Officer is legal and proper. In view of the aforesaid observation the appeal of the present petitioners was dismissed by the Tribunal. Against the aforesaid order of the Tribunal, the petitioners have preferred this Special Civil Application. ( 6 ) AT the time of admitting this matter, the Court has passed the following order :-". . . . . . . . . Rule. Heard with regard to the interim relief. No affidavit in reply has been filed. It is clear from the basic finding of the Tribunal that the distribution of the profit by way of gift as particularized in the relevant Resolution of the Society and the Committee is as per the approval of the Committee as well as the annual general meeting and is not mala fide. In the face of such finding of the Tribunal, the finding that it would amount to misapplication prima facie appears to be in excess of jurisdiction of the Tribunal in dismissing the appeal in question. The Tribunal had granted interim relief to the effect that recovery should not be effected from the petitioners. Such interim relief also deserves to be granted till the petition is finally decided. Order accordingly. . . . . . . . . . . " ( 7 ) AT the time of hearing of this Special Civil Application, it was argued by Mr. J. R. Nanavati, learned Advocate appearing for the petitioners, that the petitioners acted in a bona fide manner and small articles of gift were distributed amongst the members under the head of "sabhasad Maal Bonus". Mr. . . . . . " ( 7 ) AT the time of hearing of this Special Civil Application, it was argued by Mr. J. R. Nanavati, learned Advocate appearing for the petitioners, that the petitioners acted in a bona fide manner and small articles of gift were distributed amongst the members under the head of "sabhasad Maal Bonus". Mr. Nanavati further submitted that even the decision of the Committee was approved by the General Body and the said benefit, therefore, was given to all the members of the Society and, accordingly, none of the petitioners had any mens rea nor any such personal benefit is taken by any of the petitioners. He, therefore, submitted that, under the circumstances, no individual liability could have been fastened on the present petitioners to make good the aforesaid so-called loss of Rs. 50,000. 00. He further submitted that when the entire General Body of the Society has approved the said decision, the petitioners cannot be subjected to the provisions under Section 93 and if at all any amount is to be recovered, all the members of the Society are equally responsible for the payment of the said amount. He submitted that, in any case, the decision of the petitioners was absolutely bona fide and there was no deliberate actio or any illegality, which could have been attributed to the present petitioners. It is submitted that, under the circumstances, the report of the Enquiry Officer as well as the order of the Tribunal may be quashed and set aside. ( 8 ) MR. DAGLI, learned AGP, on the other hand, has supported the decision of the Cooperative Tribunal as well as the report of the Enquiry Officer. I have heard Advocates of both the sides. ( 9 ) IT is not in dispute that the decision in question, regarding distribution of the profit by way of gift, is approved by all the members in its Annual General Meeting. The Tribunal has observed in the judgment that payment of rebate is distributed according to the shareholding, which is illegal in terms of Section 66 (2 ). This illegal distribution of profit is not mala fide since it is approved by the Committee as well as the Annual General Meeting, but the same is illegal, though the Members of the Committee have not got any benefit personally for themselves or for their friends. This illegal distribution of profit is not mala fide since it is approved by the Committee as well as the Annual General Meeting, but the same is illegal, though the Members of the Committee have not got any benefit personally for themselves or for their friends. The Tribunal, therefore, came to the conclusion that this may not be a case of misappropriation. However, the Tribunal came to the conclusion that even misapplication of fund is covered by Section 83 and on that ground, the report of the Enquiry Officer was found to be legal and proper. ( 10 ) IT is not in dispute that the petitioners have not taken any advantage of the position of being office bearers. It is also not in dispute that the decision of the petitioners regarding distribution of certain gifts to the members is approved by the General Body in its Annual General Meeting. Further, all the members of the Society are the beneficiaries of the aforesaid Resolution and no particular part is played by any of the members of the Managing Committee. It is not in dispute that when the Managing Committee decided to distribute the aforesaid articles, necessary Resolutions were passed in the meeting and, subsequently, approved by the General Body in its Annual General Meeting. Under these circumstances, the question which requires consideration is whether the petitioners alone can be held responsible for the aforesaid action or it is really the decision of the entire body of the Society or whether all the members are responsible for the aforesaid action, especially when the action is approved by the General Body in its meeting. It may be true that the aforesaid action of distribution of "sabhasad Maal Bonus" may not be in consonance with the provisions of the Act, but simply because the provision of the Act is not properly applied by the petitioner, ipso facto, can they be held responsible, by which they are asked to pay back the entire amount as ordered by the Enquiry Officer. ( 11 ) AT this stage, it would be useful to rely upon the judgment of this Court in Shankarbhai Devjibhai Patel and others v. Sabarkantha Jilla Sahakari Kharid Vechan Sangh Ltd. , and others, 1984 GLH 498 . This Court has observed as under in paragraph 30 :-". . . . . . . . . 30. ( 11 ) AT this stage, it would be useful to rely upon the judgment of this Court in Shankarbhai Devjibhai Patel and others v. Sabarkantha Jilla Sahakari Kharid Vechan Sangh Ltd. , and others, 1984 GLH 498 . This Court has observed as under in paragraph 30 :-". . . . . . . . . 30. In the aforesaid facts and circumstances of the case, the finding arrived at by the Investigating Officer and the Tribunal that the expenditure incurred was not in accordance with the provisions of Sections 65 and 66 of the Act may be correct. But is it sufficient to hold that such an action would amount to misconduct inviting action under Section 93 of the Act. The action under Section 93 of the Act presupposes something more than bona fide mistake. Simply non-observance of the provisions of a statute is not sufficient. In the instant case taking the case of the Cooperative Department, at the highest it comes to this, "the petitioners are honest and efficient. They are persons with integrity and of serviceable nature. But they have not followed certain provisions of the Act and the Rules strictly. When they committed this lapse it did not occur even to the Government nominees that something improper or irregular was being done. Moreover, that which is held to have been irregular or improper was being done by many societies in the State. Such practice was in vogue so much so that the Registrar of Cooperative Societies was required to issue a circular pointing out to different societies that such expenditure was not proper. " Thus, in the facts and circumstances of the case, it cannot be said that since the expenditure incurred was not in accordance with the provisions of Sections 65 and 66 of the Act, without there being anything more to suggest unjustness or impropriety, it would amount to misconduct inviting action for surcharge under the provisions of Section 93 of the Act. There is no element of dishonesty. There is no element of wanton disregard of the provisions of the Act and Rules. There is nothing to suggest gross negligence or wilful negligence. Even negligence is not suggested. All that is suggested is bona fide mistake in over exuberance and hence, failure to observe the provisions of law strictly. There is no element of dishonesty. There is no element of wanton disregard of the provisions of the Act and Rules. There is nothing to suggest gross negligence or wilful negligence. Even negligence is not suggested. All that is suggested is bona fide mistake in over exuberance and hence, failure to observe the provisions of law strictly. In this view of the matter, the lower authorities were clearly wrong in invoking the provisions of Section 93 of the Act. The lower authorities are clearly wrong in holding that the petitioners were personally liable for the amount spent by the Society for the purchase (and distribution) of wrist-watches and wall clocks for distributing the same to the members of the Managing Committee. Similarly the lower authorities grossly erred in holding that the petitioners were liable for the expenses incurred in connection with the purchase and distribution of stainless utensils to the members of the Society and to some staff members. . . . . . . . . . . " ( 12 ) MR. NANAVATI has also argued that once the decision is approved by the General Body, it should be treated as the decision of the General Body itself and, in that view of the matter, the petitioners cannot be asked to pay back the entire amount from their own pocket. There is considerable force in the said argument of Mr. Nanavati, because, all the members of the Society, by virtue of accepting the Resolution in its Annual General Meeting, are the beneficiaries of receiving the aforesaid articles. Under these circumstances, it cannot be said that the present petitioners alone are responsible for making good the aforesaid so-called loss of Rs. 50,000. 00. In view of the aforesaid aspect of the matter and more particularly, when the General Body has approved the decision in its Annual General Meeting, in my view, the resort to the provisions of Section 93 of the Act is uncalled for in the present case. The authority, therefore, clearly erred in invoking the said provision. Considering the aforesaid aspect of the matter, the order of the Tribunal as well as the report of the Enquiry Officer is required to be quashed and set aside and the petition is required to be allowed. ( 13 ) IN the result, the petition is allowed. The authority, therefore, clearly erred in invoking the said provision. Considering the aforesaid aspect of the matter, the order of the Tribunal as well as the report of the Enquiry Officer is required to be quashed and set aside and the petition is required to be allowed. ( 13 ) IN the result, the petition is allowed. The orders passed by the Investigating Officer, as well as the Tribunal, at Annexure a as well as Annexure c are quashed and set aside. Rule is made absolute, with no order as to costs. .