Research › Search › Judgment

Calcutta High Court · body

2005 DIGILAW 232 (CAL)

SANDHYA GHOSH v. STATE OF WEST BENGAL

2005-04-05

SOUMITRA SEN

body2005
Soumitra Sen ( 1 ) THE petitioners were served with a show-cause-notice dated 19th july, 2002 issued under Section 30 (1) of the West Bengal Co-operative societies Act, 1983 (hereinafter referred to as the said Act), From the said show-cause-notice it appears that the Assistant Registrar of Co-operative societies (ARCS) had formed an opinion on the basis of a report of enquiry held under Section 93 of the said Act that the petitioners had misused some funds in connection with purchase of a land. The petitioners replied to the said show-cause-notice by a letter dated 3rd August, 2002 wherein it was, inter alia, contended that since copy of the said enquiry report was not served, appropriate answer could not be given. Subsequent thereto, by a communication dated 26th August, 2002 ARCS forwarded the copy of the enquiry report. Upon receiving the same, the petitioners, by a letter dated 8th September, 2002 gave a detailed reply to the said enquiry report. Thereafter, the ARCS had passed the impugned order dated 24th september, 2002 whereby an administrator was sought to be appointed and the Board of Directors of the petitioner was asked to vacate its office. ( 2 ) THE petitioners have contended that the impugned order is bad in law, inasmuch as without dissolving the Board, no administrator can be appointed and in support of the said proposition, a decision reported in 1994 (2) CLJ 140 was relied upon. It was also submitted that in terms of section 30 sub-section (1) of the said Act that the Registrar after service of the notice upon the Board is required to give an opportunity of hearing and only thereafter can pass an order in writing giving reasons for dissolution of the Board. ( 3 ) IT is also submitted that the impugned order does not give any reasons as to why the Board has been dissolved nor does it deal with any of the points that has been mentioned in the reply to the enquiry report given by the petitioners. ( 4 ) ON behalf of the respondents, reliance has been placed on the enquiry report. It was sought to be submitted on the basis of the finding of the enquiry officer that the petitioners have misused public money and, therefore, the decision taken by the ARCS in terms of Section 30 (1) was justified. ( 4 ) ON behalf of the respondents, reliance has been placed on the enquiry report. It was sought to be submitted on the basis of the finding of the enquiry officer that the petitioners have misused public money and, therefore, the decision taken by the ARCS in terms of Section 30 (1) was justified. It appears from the enquiry report that while the enquiry was being conducted, the enquiry officer did not find certain documents more particularly the agreement under which the land was sought to be purchased. But, however, it is recorded in the enquiry report itself that the relevant document was in possession of the Secretary and as the Secretary was unwell, these documents were not available. ( 5 ) IT further appears from the said enquiry report that the land, which was sought to be purchased is actually a leasehold land. The owner is the state of West Bengal. Therefore, it was concluded that the decision to purchase the land was not a proper decision. ( 6 ) THOUGH, the enquiry officer has come to a conclusion that the money has been misappropriated, but, the ARCS in the order, has stated that the money has been misused. The expressions "misuse" and "misappropriation have two different connotations and cannot be used synonymously with each other. The enquiry officer has not come to any conclusion that any of the members of the Board of Directors have made any unlawful gain in the said transaction and no misappropriation of funds could be established. The decision to purchase may be an incorrect commercial decision, but it could not be said that it is a mala fide transaction or a transaction lacking in bona fide. From the reply to the enquiry report it also appears that the decision to purchase the land and/or the leasehold interest in the land was taken by the Board and was approved in the general meeting. Therefore, the general body of the members of the co-operative society had principally agreed that the land in question should be purchased. ( 7 ) A co-operative society while carrying on its usual course of business may make a wrong commercial decision. But all such decisions may not be lacking in bona fide. The inefficiency of the Board of Directors in conducting the affairs, in all cases, may not amount to mismanagement of the affairs of the society. ( 7 ) A co-operative society while carrying on its usual course of business may make a wrong commercial decision. But all such decisions may not be lacking in bona fide. The inefficiency of the Board of Directors in conducting the affairs, in all cases, may not amount to mismanagement of the affairs of the society. It is nobody's case that the financial position of the Co-operative society has been put to a jeopardy of that the reserve of the Co-operative society has been depleted to such an extent that the society would be unable to pay the depositors by reason of the transaction, which they had entered into. The ground for dissolution as contained in Section 30 is quite different from the grounds for dissolution and reconstitution under Section 29 of the said Act. Under Section 29 if a Board mismanages its affairs it may be proper to call a special general meeting for the purpose of dissolution of the Board and to reconstitute it. But the dissolution as contemplated under Section 30 can be done under certain circumstances, which is contained in sub-section (1) of Section 30. None of the grounds, except 30 (i) (ii) can be attracted. In the instant case, however, even with regard to the said clause nothing specifically has heen shown as to how the interest of the concerned Society has been affected prejudically by trying to enter into the transaction for purchase of the land. There is no allegation against any members of the Board of Directors or any members of the Society that any wrongful gain is sought to be made by any one with regard to the said transaction, which was under scrutiny by the ARCS. ( 8 ) ON behalf of the respondents, the decision reported in 1997 (9)SCC 78 was relied upon in support of the proposition that in case of urgency the reasons need not be given. The decision reported in AIR 2002 Punjab and Haryana page 74 was cited in support of the proposition that in cases where delay can defeat the objective, principle of natural justice need not be followed. The decision reported in AIR 2002 Punjab and Haryana page 74 was cited in support of the proposition that in cases where delay can defeat the objective, principle of natural justice need not be followed. The decision reported in 79 CWN 986 has been cited in support of the proposition that if the State Government has acted justly and fairly and not arbitrarily or capriciously, then it must be held that there is no violation of the rules of natural justice even though the Managing Committee was not given a hearing. ( 9 ) THE decision reported in 1997 (9) SCC 78 was with regard to the land Acquisition Act, 1894. The Hon'ble Supreme Court while dealing with section 4 of the said Act has held that the urgency as required under the said section, need not be explained by reasons, when it was necessary to acquire the land on an urgent basis. The said principle has no application, in the facts and circumstances of the instant case. The decision reported in air 2002 Punjab and Haryana 74 (supra) deals with Section 29 of the State financial Corporations Act, which gives the power to the Financial corporation to take over the property of an industrial concern. In the context of the said Section 29 of the State Financial Corporation Act, the High Court have held that when it is the legislative intent is to secure public funds and loss of time can result in loss to the State Exchequer, the Parliament has advisedly omitted to provide for any kind of opportunity the exclusion of opportunity appears to be intentional on the part of the legislature and, therefore, the principles of natural justice, cannot be read into such a provision. In the instant case, Section 30 clearly provides that an opportunity of hearing must be given before a decision is taken to dissolve the Board. In the decision reported in 79 CWN 986, it has been held that only when it is found that the State Government has acted justly and fairly it must be held that the rules of natural justice have not been violated. The said decision was passed while dealing with the provisions of Section 26 (1) of the Bengal co-operative Societies Act, 1940. The provisions are not peri meteria with the provisions of Section 30 of the said Act. The said decision was passed while dealing with the provisions of Section 26 (1) of the Bengal co-operative Societies Act, 1940. The provisions are not peri meteria with the provisions of Section 30 of the said Act. Therefore, the principles will not apply in the facts and circumstances of the instant case. ( 10 ) APART from the factual issue, which I have already dealt with, what is troubling me is that in Section 30 sub-section (1), it has been clearly stated that after a notice is given upon the Board an opportunity of hearing should be given and only thereafter, an order in writing stating reasons therein, the Board can be dissolved. ( 11 ) I do not accept the submission of the petitioners that without specifically dissolving the Board, administrator cannot be appointed for the reasons that in the impugned order itself, the Board has been directed to vacate the office. Unless the Board is dissolved, it cannot be directed to vacate the office. Therefore, by not using the expression "dissolved" in the impugned order the effect of the direction to vacate is same that of the dissolution of the Board. I have formed the said opinion having regard to the language of Section 29 as well as Section 30 of the said Act, Except where the Board is dissolved it cannot be asked to vacate the office and a board can only be asked to vacate the office under Section 30 of the said act, which contemplates dissolution of the Board under certain circumstances. ( 12 ) BUT, however, the chain of events of the instant case clearly goes to suggest that after the enquiry report was given to the petitioners and a reply thereto, has been given, no hearing was afforded to the petitioners by the ARCS. The reply to the enquiry report is not the hearing, which is contemplated under Section 30 sub-sectoin (1) of the said Act. In the instant case, the Board was required to be heard and thereafter, an order could have been passed. Since, there is a specific provision contained in the section which is, in fact, in the light that the principles of natural justice, without following the procedure, established in law, no order can be passed for dissolution of the Board. In the instant case, the Board was required to be heard and thereafter, an order could have been passed. Since, there is a specific provision contained in the section which is, in fact, in the light that the principles of natural justice, without following the procedure, established in law, no order can be passed for dissolution of the Board. ( 13 ) HAVING regard to the facts and circumstances of the case and having regard to the proposition of law, as discussed above, I am of the opinion that the impugned order has been passed erroneously and the same is, accordingly, set aside. The writ petition is allowed to the extent indicated above. I find from the records that an interim order of status quo is continuing for some time, but in terms of the relevant provisions of the Co-operative societies Act and Rules framed thereunder, an election, if not already held, is required to be held. Therefore, I direct the petitioners to take appropriate steps as is required under the law to hold election for the purpose of constituting a fresh Board of Directors. Such steps are to be completed within a period of three months from date and the election are to be held immediately after completion of the three months period. Urgent xerox certified copy, if applied for, be given early.