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2009 DIGILAW 591 (GUJ)

Vikrambhai Vijaybhai Patel v. State of Gujarat

2009-09-03

K.M.THAKER, M.S.SHAH

body2009
Judgment Mohit S. Shah, J.—Leave to add Registrar of Co-operative Societies, Gujarat State as Respondent No. 7. Ms. Pathak, learned AGP waives service of notice for the newly added party Respondent. 2. The petitioner has challenged the order dated 18.08.2009 of the election officer for Kheda District Central Co-operative Bank Ltd. and Dy. Collector, Nadiad rejecting the petitioner’s objections against nomination of Respondent No. 5 for election of a Director from the Constituency in Category No. 1. The petitioner has also challenged the subsequent order dated 19.08.2009 passed by the same officer declaring Respondent No. 5 as having been declared elected uncontested. 3. Section 27(2) of the Gujarat Co-operative Societies Act, 1961 (“the Act” for brevity”) disentitles a defaulter Society from exercising voting rights till all repayments are made. Section 145-F (1A)(b) also disqualifies a person from contesting election to a District Central Co-operative Bank, if the co-operative society of which he is a delegate is in default for a period more than 12 months, in payment of dues. 4. The provisions of the Act and the election Rules cast a duty on the respondent - Bank to certify while forwarding the proposed list of voters to the election officer, whether any member had suffered any disqualification and the respondent - Bank had not indicated such default on the part of the aforesaid co-operative society. 5. The Election Officer passed the impugned order dated 18.08.2009 rejecting the petitioner’s objection against nomination of Respondent No. 5 (alongwith certificate of the Respondent No. 4 Bank - Vadad Seva Sahakari Mandali Ltd. is a defaulter for the year 2008-09), because the objection was received on 18.08.2009 after the scrutiny of the nomination forms. 6. The main contention raised in the petition is that Respondent No. 5 is contesting election as a member of Vadad Seva Sahakari Mandali Ltd., a co-operative society which is a member of Respondent No. 4 - Kheda District Central Co-operative Bank (hereinafter referred to as ‘The District Bank’). The petitioner had produced before the Election Officer a certificate issued by the District Bank on 13.08.2009 certifying that the Vadad Seva Sahakari Mandali Ltd., (hereinafter referred to as “the Society”) was a defaulter of the District Bank in the year 2008-09 and that the certificate was issued after proper scrutiny. The petitioner had produced before the Election Officer a certificate issued by the District Bank on 13.08.2009 certifying that the Vadad Seva Sahakari Mandali Ltd., (hereinafter referred to as “the Society”) was a defaulter of the District Bank in the year 2008-09 and that the certificate was issued after proper scrutiny. At the time of hearing, a specific query was put to the learned Counsel for the Respondent No. 4 - Bank, as to whether co-operative society in question was a defaulter of the District Bank as on 10th August, 2009, (date of filing nomination) and on 17th August, 2009, (date of scrutiny of nomination forms). Affidavit dated 02.09.2009 has been filed by in-charge General Manager of the District Bank stating that “the co-operative society in question is primary agricultural credit co-operative society which had availed of various credit facilities from the District Bank. Lastly, different limits were sanctioned on 01.08.2007 in various accounts of the said society for a period of three years and as on 31.08.2009, the said society is indebted to the Respondent No. 4 - Bank, an amount of Rs. 2.35 crores approximately including interest is due, outstanding and payable by the said society in various accounts to the Respondent No. 4 – Bank”. (emphasis supplied) 7. While issuing notice on this petition returnable on 25.8.2009, it was made clear that the notice was for final disposal. Yesterday, the final hearing commenced and the matter was substantially heard, and was adjourned till today only to permit the petitioner to move an amendment which has been granted by a separate order passed today. Thereafter, the arguments of the learned Counsel for the parties including Respondent Nos. 4, 5 and Respondent No. 6 - Co-operative Society were heard yesterday. The learned advocate for the petitioner, under instructions of the petitioner who is present before the Court, makes a request for permission to withdraw the petition. Since several important issues of public interest arise in this petition, and looking to the particular circumstances in which the request is made, we do not grant the permission sought for. 8. The Gujarat Co-operative Societies Act, 1961 has been amended by Amendment Act No. 1 of 2008 which received the assent of the Governor on 23.01.2008 and is deemed to have come into force on 8th October, 2007. 8. The Gujarat Co-operative Societies Act, 1961 has been amended by Amendment Act No. 1 of 2008 which received the assent of the Governor on 23.01.2008 and is deemed to have come into force on 8th October, 2007. By the said Amendment Act, several extensive amendments have been made to the Act, particularly, amendments have been made to Sections 27 and 145-F to disqualify a defaulter in respect of the dues of the co-operative society to which elections are being held from participating in the elections either as a voter or as a candidate. The relevant statutory provisions of the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as “the Act”) as amended, are as under :— “27. No rights of membership to be exercised till due payments are made:— (1) No person shall exercise the rights of a member of a society, until he has made such payment to the society in respect of membership, or acquired such interest in the society, as may be prescribed by the rules, or the bye-laws of such society. (2) The person who has committed a default and remains as such defaulter in making repayment of loan or interest thereon for a period of one year from due date of repayment of such loan or interest or installment shall not be entitled to exercise voting rights of a member of a society till all such repayments are made. “Section 145-F(1) . . . . . . . . . . . . . . . “(1)(A) (i)(a) No member of a society in the Central Co-operative Bank and the State Co-operative Bank shall be eligible to be elected as a member in the committee if he is in default for a period of twelve months in payment of dues to the society. . . . . . . . . . . . . . “(1)(A) (i)(a) No member of a society in the Central Co-operative Bank and the State Co-operative Bank shall be eligible to be elected as a member in the committee if he is in default for a period of twelve months in payment of dues to the society. (b) no person elected as a member of a society in the Central Co-operative Bank and the State Co-operative Bank shall be continued as a member if he is in default for a period exceeding twelve months in payment of dues to the society unless the amount in default with due interest is paid to the society; (c) no member of a Primary Agricultural Credit Co-operative Society shall be eligible to be elected as a member in the committee of the State Co-operative Bank or a Central Co-operative Bank if the society is in default in payment of dues to the co-operative Bank unless the default with due interest is paid to the co-operative bank; (d) no member of a non-credit society who is a member in the committee of a Central Co-operative Bank or the State Co-operative Bank shall be continued as such member if the society commits default for a period exceeding 90 days in payment of dues to the bank. (ii) The above provisions shall be in addition to and not in derogation of any other provisions for disqualification contained in this Act.” Rule 32. Qualifications for the member of the committee:—(1) Every member of a society who is entitled to vote shall be eligible for appointment as a member of a committee thereof it— (a) he is not in default in respect of any loan taken by him for such period as is specified in the bye-laws, or (b) he has not directly or indirectly any interest in any subsisting contract made with the society or in any property sold or purchased by the society or any other transaction of the society except in any investment made in or any loan taken from the society, or (c) if he is not otherwise disqualified for appointment as such member or, (d) to (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1A) A member of the committee who incurs any of the disqualifications specified in Sub-rule (1) shall vacate the office and if he does not vacate such office, he shall be removed by Registrar as such member : Provided that the Registrar, shall before making such order of removal, give the person concerned an opportunity of being heard. [emphasis supplied] Bye-Law No. 31(6) of Respondent No. 4 - Bank reads as under :— “If a member of this Bank or any co-operative society working within the jurisdiction of the Bank is a defaulter by not paying his/their dues within the time limit, such a member or such society or a delegate of such society shall be disqualified from contesting as a candidate for election as a Director of the Bank nor shall such member/delegate of the society continue as a Director of the Bank.” 9. The aforesaid statutory provisions and similar bye-laws of the Gujarat Co-operative Bank came up for interpretation in Gujarat State Co-operative Bank Ltd. & Anr. vs. State of Gujarat & Ors. in 2009 (1) GLH 371 . It is held that the expression “person” in Section 27 includes a co-operative society which has defaulted in payment of its dues. After considering the provisions of the amended Act and also the statutory order dated 01.06.05 issued by the Registrar of co-operative Societies, Gujarat State under Section 160 of the Act, this Court held that every member of a defaulter society is to be treated as a defaulter for the purpose of disqualification under similar bye-law No. 27A read with the statutory order dated 01.06.2005 and none of the members of the defaulter society can participate in the elections to the Board of Directors of any other co-operative society. 10. In the facts of the present case, as per the certificate dated 13.08.2009 as well as the affidavit dated 2.9.2009 filed on behalf of Respondent No. 4 - Bank, Respondent No. 6 - Vadad Seva Sahakari Mandali Ltd. is shown to be a defaulter for more than a year i.e. more than 12 months, on the date of filing nomination for elections to the Board of Directors of Respondent No. 4 - Bank and also on the date of scrutiny of nomination forms and even as on today. Even then inspite of the clear statutory provisions, Respondent No. 5 (a member and delegate of Respondent No. 6 - society) is declared elected uncontested. This will cause grave prejudice to the public interest as explained in the later part of this judgment. Respondent No. 4 is a District Central Co-operative Bank which not only receives large amounts of funds from NABARD and the Gujarat State Co-operative Bank Ltd. but also from a large number of depositors who include farmers. Respondent No. 6 - Society is a defaulter of Respondent No. 4 - Bank to the tune of Rs. 2.35 crores approximately. There is a statutory disqualification and Respondent No. 5 cannot hold the office of Director of Respondent No. 4 - Bank. 11. Mr. N.D. Nanavaty, learned Counsel for Respondent No. 5 has however, submitted on the basis of the affidavit filed by Respondent No. 5 and on the basis of the averments made in Civil Application No. 9589/2009 (which was filed by Respondent No. 6 - Society for being impleaded as a party respondent in this petition) that Respondent No. 6 - Society is eligible to get the benefit of the recommendations of Vaidanathan Committee and also benefit of the provisions of the Agricultural Debt Waiver Relief Scheme, 2008 and that if the benefits of these schemes are given to Respondent No. 6 - Society, it will get time upto 31.12.2009 for repayment of its dues and that till then Respondent No. 6 cannot be considered as a defaulter. It is also submitted that Respondent No. 6 would be able to clear, by 31.12.2009, the entire amount with the benefit of the above scheme and the Vaidanathan Committee recommendations. 12. Whether Respondent No. 6 - Society has made any such application seeking benefits under either of the above schemes, is not brought to our notice. Mr. Dhaval Vyas for Respondent No. 6 - Society submits that no such formal application is required and the matter will be considered by Respondent No. 4 - Bank on its own as to whether the members who are having outstanding dues to Respondent No. 4 - Bank are eligible and entitled to get benefits of either or both of the above schemes. Mr. Ashish H. Shah, learned Counsel for Respondent No. 4 - Bank states that he has no instructions on the above issue. 13. Mr. Ashish H. Shah, learned Counsel for Respondent No. 4 - Bank states that he has no instructions on the above issue. 13. It clearly emerges that the Respondent No. 5, a delegate of Respondent No. 6 - Society, which society is a defaulter of Respondent No. 4 - Bank for more than 12 months and presently the outstanding dues to the tune of Rs. 2.35 crores, will work as a director of Respondent No. 4 - Bank and decide whether Respondent No. 6 - Society should be granted benefits of loan waiver and other benefits. 14. Apart from the fact that there is no material before us on the basis of which it can even remotely be suggested, much less concluded, that Respondent No. 6 - Society is entitled to get the benefit of any such scheme, the fact remains that as on 31.08.2009, Respondent No. 6 - Society is indebted to the Respondent No. 4 - Bank to the tune of Rs. 2.35 crores approximately and that Respondent No. 6 - Society is a defaulter of Respondent No. 4 - Bank at least since 1st April, 2008. In view of this uncontroverted factual position, Respondent No. 6 - Society could not have been permitted to participate in the elections through Respondent No. 5 or any other delegate either for the purpose of voting in the elections or for the purpose of contesting in the elections. 15. Rule 4(3) of the Gujarat Specific co-operative Societies Elections to Committees Rules, 1982 governing the elections to the Board of Directors of Respondent No. 4 - Bank specifically provides that - -simultaneously with sending of provisional list of voters under Sub-clause (2) every society shall send in writing to the Collector a list of members who are disqualified to vote as per the provisions of the Act, Rules or its Bye-laws and shall inform to the member who has been shown disqualified in the said list in writing, pointing out such disqualification incurred by him. The said list shall be treated as objection under Sub-rule (3) of Rule 6.” While forwarding the proposed list of voters under Rule 4(2), Respondent No. 4 - Bank did not inform the election officer that Respondent No. 6 - society is a defaulter of Respondent No. 4 - Bank fro more than a year i.e. at least from 1st April, 2008 onwards. Respondent No. 4 - Bank, therefore, did not discharge its obligation under Sub-rule (3) of Rule 4, inspite of the fact that Respondent No. 6 - society has been a defaulter in respect of huge amounts at least from 1st April, 2008 onwards. 16. Coming to the role played by the election officer - Respondent No. 3 herein, Rule 23 provides for scrutiny of nomination papers and Sub-rule (2) of Rule 23 specifically provides as under :— “23 (2). The Returning Officer shall then examine the nomination papers and shall decide all objections which may be to any nomination and may, either on such objection or on his own motion, after such summary inquiry, if any, as he thinks necessary, reject any nomination on any of the following grounds, that is to say:— (a) that the candidate is disqualified for being chosen to fill the seat by or under the Act, Rules or bye-laws. (b) to (d) . . . . . . . . . . . . . . .” [emphasis supplied] A bare perusal of the above Rule indicates that the Returning Officer is expected to ascertain whether the candidate is disqualified for being chosen to fill the seat by or under the Act, Rules or bye-laws. Since Section 27(2) and Section 145-F as well as Rule 32 of the Gujarat Co-operative Society Rules contain specific provisions disabling / disqualifying a member — society from participating in the elections to the board of Directors of Respondent No. 4 — bank, if the member of co-operative society in question (whose delegate has filed the nomination form) is indebted to Respondent No. 4 for more than 12 months. The election officer was, therefore, required to ascertain whether Respondent No. 6 - Society is disqualified from participating in the elections. The contention that the objection lodged by the petitioner was received late by half an hour or so, cannot be accepted because Sub-rule (2) of Rule 23 enjoins a duty on the election officer to ascertain the eligibility or disqualification of a candidate either on the objection of any person or on his own motion. 17. Mrs. The contention that the objection lodged by the petitioner was received late by half an hour or so, cannot be accepted because Sub-rule (2) of Rule 23 enjoins a duty on the election officer to ascertain the eligibility or disqualification of a candidate either on the objection of any person or on his own motion. 17. Mrs. V.S. Pathak, learned AGP for the election officer - Respondent No. 3, however, submits that neither Respondent No. 4 — Bank had indicated that Respondent No. 6 — Society was a defaulter nor does the prescribed nomination form require a candidate to indicate whether the candidate himself or co-operative society of which he is a member, is a defaulter for more than a year or 12 months as indicated in Section 27(2) or Section 145-F or in Rule 32 of the Rules. 18. The relevant portion of the Nomination Form prescribed under Rule 18(2) reads as under :— FORM II (See Rule 18(2)) FORM OF NOMINATION PAPER (Election to the . . . . . . . . . . . . . . . . . . . . Co-operative Ltd. . . . . . . . . . . . . . . . . . . . . . .Taluka . . . . . . . . . . . . .District). (To be filled by the proposer) I hereby nominate . . . . . . . . . . . . . . . . . . . . . . . . . . as a candidate for election from the . . . . . . . . . . . . . . . . . . . . . constituency. Name of the constituency Name of the candidate Father’s/Husband’s name Age Full postal address of the candidate Name of the constituency In a constituency having a reserved seat, state the particulars of the Caste, or Tribe small farmer or marginal farmer to which the candidate belongs. The name of the constituency in which the name of the candidate is entered as a voter in the list of voters. Serial number of the candidate in the list of voters of the constituency aforementioned in which his name is entered as a voter. Name of the proposer Serial number of the proposer in the list of voters of the constituency. Serial number of the candidate in the list of voters of the constituency aforementioned in which his name is entered as a voter. Name of the proposer Serial number of the proposer in the list of voters of the constituency. (Signature of the proposer) Name of the Seconder. . . . . . . . . . . Serial Number of the Seconder in the list of voters of the constituency Signature of the Seconder Declaration by Candidate I hereby signify my willingness to serve as a member of the Committee of the Society if I am elected. Date . . . . . . . . . . . . . . (Signature of the Candidate) Further declaration to be made by a Schedule Castes or a Scheduled Tribes, Small Farmer or marginal farmer Candidate:— . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Date. . . . . . . . . . . . . . (Signature of the Candidate) 19. It is true that Form II prescribed by the Election Rules of 1982 do not require the candidate to declare whether the candidate or his co-operative society have any outstanding dues of the co-operative society to which elections are being held or dues of any other co-operative society, but considering the fact that the provisions for disqualification on the ground of outstanding dues were introduced by the Amending Act No. 1 of 2008 which came into force from 27th October, 2007, it is obvious that the Rule making authority has not kept pace with the legislative mandate and therefore, the nomination forms to the Gujarat Specified Co-op. Societies Elections to Committees Rules, 1982 must be considered incomplete and not in accordance with the mandatory statutory provisions of the Act. Respondent Nos. 1 & 2 are therefore, required to be directed to revise the nomination forms. Societies Elections to Committees Rules, 1982 must be considered incomplete and not in accordance with the mandatory statutory provisions of the Act. Respondent Nos. 1 & 2 are therefore, required to be directed to revise the nomination forms. Form II under Rule 18(2) and Form IIA Rule 19(5) to bring them in conformity with the provisions of Section 27(2), Section 145F, Rule 32 and the statutory order dated 1st June of 2005 under Section 160 of the Gujarat Co-operative Societies Act, 1961. 20. We are conscious of the legal position that ordinarily it is not for the Court to direct any Rule making authority to undertake such Rule making exercise but in view of the forgoing discussion, it is apparent that the nomination forms prescribed by the Gujarat Specified Co-op. Societies Elections to Committees Rules, 1982 fall, not only short of the statutory requirements indicated hereinabove, but will permit defaulter members to frustrate the entire object of the Amending Act, because if the candidate or the co-operative society (of which the candidate is a member) do not disclose that the co-operative society or the candidate is a defaulter for a year i.e. more than 12 months, there would hardly be any other person who may be in the knowledge of such default. The facts of this case also indicate that Respondent No. 4 - Bank did not point out this default while sending the proposed list of voters under Sub-rules (2) and (3) of Rule 4 of the Election Rules. Besides the statutory provisions as explained in the statutory order dated 1st January, 2005 under Section 160 of the Act disable a defaulter candidate or a defaulter co-operative society from participating in elections not only to the co-operative society, the Managing Committee/Board of Directors of which the candidate/his society are defaulters, but in contesting elections to Managing Committee/Board of Directors of any other co-operative society, as held by this Court in Gujarat State co-operative Bank Ltd. and Anr. vs. State of Gujarat and Ors., 2009 (1) GLH 371 . 21. Now coming to the facts of this case, there were four persons who submitted their nomination forms from the Constituency called Vibhag 1. The nomination of the petitioner was rejected on the ground that the co-operative society of which the petitioner is member, is a defaulter for more than a year. 21. Now coming to the facts of this case, there were four persons who submitted their nomination forms from the Constituency called Vibhag 1. The nomination of the petitioner was rejected on the ground that the co-operative society of which the petitioner is member, is a defaulter for more than a year. Two other candidates withdrew their nomination forms leaving only Respondent No. 5 (a member of Respondent No. 6 - society) in the fray. Since the objection against Respondent No. 5 that Respondent No. 6 - society is a defaulter for more than a year i.e. more than 12 months was required to be taken into consideration before declaring Respondent No. 5 as having been elected uncontested, but the same was not taken into account inspite of the aforesaid statutory provisions. It will be necessary to pass appropriate orders to prevent any damage being caused to the public interest because if, Respondent No. 5 (the delegate of Respondent No. 6 - society) is permitted to hold the office of Director of Respondent No. 4 - Bank, consideration of the question whether Respondent No. 6 - society is eligible or entitled to get the benefits of any of the debt waiver relief schemes or the benefit of recommendations of Vaidanathan Committee, is bound to be vitiated and the whole purpose for which the State Legislature amended the Gujarat Co-operative Societies Act, 1961 by the Amendment Act No. 1 of 2008, will be frustrated. 22. In view of the above discussion, Respondent No. 5 shall have to be restrained from acting as a Director of Respondent No. 4 - Bank till the Registrar of co-operative societies of Gujarat State finally considers the question whether Respondent No. 6 - Vadad Seva Sahakari Mandali Ltd. has incurred any disqualification under Section 27(2), Section 145-F and Rule 32 of the Gujarat Co-operative Societies Rules, 1965. On the basis of the material on record, this appears to be the only possible conclusion, but since Respondent Nos. On the basis of the material on record, this appears to be the only possible conclusion, but since Respondent Nos. 5 and 6 contend that they will not be defaulters if Respondent No. 6 is given the benefit of loan waiver schemes, and since the power to declare a member as having incurred such disqualification is conferred on the Registrar of co-operative societies of Gujarat State, we direct that the Registrar of co-operative societies of Gujarat State shall hold such inquiry within one month from the date of receipt of this judgment. In any case, till the State Registrar of co-operative societies finally decides this question, Respondent No. 5 (the delegate of Respondent No. 6 - society) shall not be permitted to act as a Director of Respondent No. 4 - Bank. 23. It is clarified that when the State Registrar of co-operative societies holds the inquiry for considering the question whether the Respondent No. 6 is a defaulter and has incurred any disqualification under Section 27(2), Section 145-F or Rule 32 of the Gujarat Co-operative Societies Rules, 1965, it will be open to Respondent No. 6 to place such material before the Registrar, as it considers relevant for the purposes of such inquiry and Respondent No. 7 shall decide the matter in accordance with law. 24. The format of the statutory nomination forms prescribed by the Gujarat Specified Co-operative Societies Election to Committees Rules, 1982 shall be modified by the State Government in light of the observations made in this judgment, after following the procedure as prescribed by the Government. It is further directed that till the nomination forms are revised in light of the observations made in this judgment, the State Government shall circulate a copy of this judgment to all the election officers holding elections, to managing committees / boards of directors of co-operative societies under the Gujarat Specified Co-operative Societies Elections to Committees Rules, 1982. 25. The petition is accordingly disposed of in terms of the directions contained in paras 22 to 24 of this judgment. Rule is made absolute. 26. Three copies of this judgment shall be made available to the learned Assistant Government Pleader to forward the same to the State Government, the Registrar of Co-operative Societies and the Election Officer for timely compliance with the directions contained in this judgment.