1. Citizens Co-operative Bank is a society registered under the Jammu & Kashmir Cooperative Societies Act of 1989 (here-in-after referred to as the Act). In order to run the affairs of the society, a governing body is constituted for purposes of controlling the Management and the affairs of the society. Members of the Board are appointed by election. The electoral body is constituted by the share holders of the bank. 2. The role of the Management of the bank had come under scrutiny and while exercising powers under the Act, Registrar Co-operative Societies issued order of supersession of the Management of the Board. It is this order which became the subject matter of challenge before the Tribunal. 3. In order to appreciate controversy involved certain facts are required to be noticed: The election to the Board of Directors of the Citizens Co-operative Bank was conducted on 11th of August, 2007, as a result of which nine Directors were declared as duly elected Directors of the Board for a period of three years. It seems that on receipt of some complaints, Registrar Co-operatives while invoking powers under Section 67 of the Act appointed Additional Registrar Co-operatives, Jammu to enquire into the constitution, working and Management of the bank. After supplying the copy of the complaint to the Management vide communication dated 29.11.2008 and after hearing them, enquiry report was submitted on 24th of January, 2009. On receipt of the enquiry report the petitioner informed the Managing Director Citizens Co-operative bank about the salient features of the report and sought clarification/rejoinder from the Management of the Bank through its Managing Director. The report reveals various acts of omission and commission relating to the functioning of the Bank, more particularly in the matter of recovery of loan from the defaulters. Reply to the said report was received from the Management which was not found conclusive as the issues referred in the report were not addressed by the Management. Same was conveyed to the Management on 9th of June, 2009. It seems that while this report was under scrutiny, some other discrepancies were reported in the working of the Bank constraining to institute one more enquiry. A committee of officials was appointed by the Registrar to enquire into new areas of concern. Same was conveyed to the Management on 9th of June, 2009. It seems that while this report was under scrutiny, some other discrepancies were reported in the working of the Bank constraining to institute one more enquiry. A committee of officials was appointed by the Registrar to enquire into new areas of concern. The enquiry report was received on 9.12.2009 which reveals that the Management was engaged in the acts detrimental to the interests of thousands of share holders and depositors. Consequently a show cause notice was issued to the Management seeking their response to the enquiry report filed on 9.12.2009. The substance of the report was communicated to the Management, in which below-mentioned deficiencies and acts of mismanagement were found:- 1) For the year 2007-08 and 2008-09 the bank has suffered net loss of Rs.158.52 lacs and 287.31 lacs; 2) The cost of Management has abnormally been inflated by the bank at the cost of thousands of depositors and share holders; 3) Inspection reports of the bank conducted by the Reserve Bank of India for the year 2007 to 2009 reveals various defaults and acts of mismanagement. One of the deficiency found was that the credit policy framed was in violation of RBI guidelines. The said policy was by way of checklist for staff for disbursement of various kinds of loans. 4) The bank was classified under Grade-III as per extent RBI instructions in the matter 5) The inspection report of the bank conducted by the RBI for the year 2008-09 shows that the gross non-performing assets of the bank have been estimated to the tune of Rs.3382.28 lacs and during the year 2008-09, 138 new accounts have turned into non-performing assets amounting to Rs.463.68 lacs. 4. A show cause notice in view of above situation was issued to the Management on 11th of December, 2009 and the Management was asked to submit its reply within a period of 7 days. The Management is stated to have failed to show cause within the specified period, accordingly Board of Directors headed by respondent No.2 was superseded on 21st of December, 2009." 5. The Management challenged the said order before Special Tribunal by filing a revision. The Tribunal after hearing the parties allowed the revision and set aside the order of superseding the Management. The Management challenged the said order before Special Tribunal by filing a revision. The Tribunal after hearing the parties allowed the revision and set aside the order of superseding the Management. The findings of the Tribunal are based on two grounds:- a) That there is a distinction between the Co-operative Society and a Co-operative Bank for the supersession of which two different procedures are provided under the Act of 1989; b) Sub Clause (1) of Section 30 of the Act deals with the supersession of a Co-operative Society while as Sub-Clause (7) deals with the supersession of a Co-operative Bank. 6. The Tribunal held that the order impugned in the revision in superseding the Management has been done in violation of sub-clause (7) as no request for supersession was made by the Reserve Bank of India. While proceeding to hold enquiry under sub-clause (1), Registrar was required to conduct enquiry on his own but instead he has relied upon two enquiry reports conducted by two different officers, which was not permissible under the Act. An enquiry under Section 67 was required to be conducted by the Registrar on his own or on requisition made by the majority of the members of the Committee or of not less than 1/3rd of the members of the Co-operative Society. Reliance placed on enquiry report under Section 67 of the Act was erroneous. 7. Feeling aggrieved of this order, present writ petitions have been filed. 8. I have heard learned counsel for the parties and perused the record. 9. The following questions are required to be determined by this Court in the present writ petitions: 1) Whether the Co-operative Bank is a society under the Societies Act and for purposes of seeking its supersession the requisition from Reserve Bank is necessary; 2) Whether Registrar is competent to initiate the proceedings for supersession in spite of the fact that there is no requisition from the Reserve Bank of India. To say it candidly, whether power of the Registrar in seeking supersession of the bank is controlled by the provisions of sub-clause (7) of Section 3o of the Act. To say it candidly, whether power of the Registrar in seeking supersession of the bank is controlled by the provisions of sub-clause (7) of Section 3o of the Act. 3) Whether Registrar Co-operatives while framing his opinion under Section 30 (1) regarding default and negligence committed by the Society has to rely only upon the report of any enquiry conducted under the Act or can frame his opinion on the basis of any other material which may come to his notice. 4) Whether the respondents had not been given adequate opportunity in defending the report of the enquiry officer. Now dealing with Question No.1: Under the Act, the Co-operative Bank has been defined as a Co-operative Society which undertakes banking business. Co-operative Society means a Society registered or deemed to be registered under the Act. Distinction between people’s co-operative banks serving their members and corporate banks doing commercial transactions is fundamental to the constitutional dispensation and understanding co-operative banking generally. The activities undertaken by a banking society involves lending and borrowing. This is purely incidental to their main co-operative activity which is a function in public domain. The distinction between a Co-operative Bank owes its origin to the definition of the banking company as incorporated in Section 5(c) of the Banking Regulation Act. Even though the definition of the banking company as defined under the Banking Regulations Act includes Co-operative Societies but the activities of the banking societies are not its main function but purely incidental to its main co-operative activity. Therefore, even though the co-operative bank is a banking company but this activity cannot be said to be exclusively confined to the banking activity as it essentially is a society registered under the Societies Act. Banking is incidental to one of its activities. Having said so, the conclusion is that the Co-operative Bank is essentially a society which is incidentally involved in banking business. It cannot be said that it is exclusively involved in the banking activity. 10. In light of what has been stated above and examining the provisions of Section 30(1) of the Act, it is not necessary that the supersession of the banking society should always require the requisition from the Reserve Bank which is the premium institution. To say it candidly, the Registrar in absence of requisition from the Reserve Bank can still proceed in the matter. To say it candidly, the Registrar in absence of requisition from the Reserve Bank can still proceed in the matter. In this view, I am fortified by the judgment captioned Greater Bombay Co-operative Bank Ltd v. M/S United Yarn Tex. Pvt. Ltd. & Ors reported in AIR 2007 SC 1584 , wherein the Hon’ble Apex Court has observed as under:- "Co-operative banks established under the Maharashtra Co-operative Societies Act, 1960 (MCS Act. 1960); the Andhra Pradesh Co-operative Societies Act, 1964 (APCS Act, 1964); and the Multi-State Co-operative Societies Act, 2002 (MSCS Act, 2002) transacting the business of banking, do not fall within the meaning of `banking company’ as defined in S.5(c) of the Banking Regulation Act, 1949 (BR Act). Therefore, the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) by invoking the Doctrine of Incorporation are not applicable to the recovery of dues by the co-operative from their members. 1999 AIR SCW 1146, Foll. (Paras 88, 56) The distinction between peoples’ co-operative banks serving their members and corporate banks doing commercial transactions is fundamental to the constitutional dispensation and understanding co-operative banking generally and in the context of co-operative banking not coming under the ambit of the BR Act. Thus, even if the co-operative are involved in the activity of banking which involves lending and borrowing, this is purely incidental to their main co-operative activity which is a function in public domain." Question No.2: Section 30 of the Act deals with the supersession and removal of the Committee. Sub clause (1) of the said Section contemplates that if in the opinion of the Registrar a Committee or Board of a Co-operative Society is persistently making fault or is negligent in performing duties imposed on the Board under the act which is prejudicial to the interests of the society or its members, the Registrar or the Government will supersede the Committee by removing the Committee or Board and appoint an Administrator. Sub Clause (7) contemplates that notwithstanding anything contained in this Act, Registrar shall in case of Cooperative Bank, if so required in writing by the Reserve Bank or National Bank for Agriculture and Rural Development can pass an order of supersession of the Board. Sub Clause (1) contemplates supersession of a society by the Registrar on the basis of opinion framed in this behalf by the Registrar. Sub Clause (1) contemplates supersession of a society by the Registrar on the basis of opinion framed in this behalf by the Registrar. The power to supersede is contingent upon the opinion that is framed by the Registrar. Before superseding the Management, a notice is required to be given to them to state their objections to the opinion framed by the Registrar. Under sub-clause (7) once report is received from the Reserve Bank or NABARD, the only course left with the Registrar is to supersede the Management without providing any notice to them. Both the provisions contemplate the role of the Registrar as an authority empowered to supersede the Management. Distinction between the two is that while exercising powers under sub-clause (1), same has to be based on the opinion framed by the Registrar whereas in case of sub-clause (7) the supersession is to be made only after receiving the report from the Reserve Bank or NABARD. While exercising power under sub-clause (1), the Registrar can contemplate changing his opinion on the basis of objections received from the Management whereas in case of sub-clause (7) there is no option left with the Registrar but to proceed with the supersession of the Management. Both the provisions contemplate different circumstances in the matter of invoking the power of supersession. As already discussed supra, the power of the Registrar is not curtailed under sub-clause (7). The said power is restricted only if there is requisition made by the Reserve Bank in which case he is bound to issue the order of supersession. The power of the Registrar is not ousted by sub-clause (7). The contention of the respondents that in the matter of supersession of a bank Registrar does not have the power under sub-clause (1) to proceed in the matter, is not legally correct. Registrar independent of sub-clause (7) can seek supersession of the bank which is a Co-operative Society. In that eventuality he is required to follow the procedure laid down in sub-clause (1) while as in case of sub-clause (7) he has no option but to supersede the society. This answers the second question. Question No.3 & 4: In order to appreciate the question formulated, interpretation of Section 30(1) of the Act is required to be understood. The said Section is reproduced as under:- "30. Supersession/removal of Committee: (1). This answers the second question. Question No.3 & 4: In order to appreciate the question formulated, interpretation of Section 30(1) of the Act is required to be understood. The said Section is reproduced as under:- "30. Supersession/removal of Committee: (1). If in the opinion of the Government or Registrar, a committee or Board, by whatever name called, of a Co-operative Society is persistently making a fault or is negligent in the performance of the duties imposed on it by this Act or the rules or bye-laws made there-under or has committed any act which is prejudicial to the interest of the Society or its members, or has failed to comply with any direction given to it by the Government or by the Registrar for the purposes of securing proper implantation of Co-operative production and other development programmes or that there is a statement in the constitution or functioning of the committee or the Board, the Government or Registrar may, after giving the committee or the Board, as the case may be, opportunity to state its objections, if any, by order in writing remove the committee or the Board and appoint one or more Administrators to manage the affairs of the society for a period not exceeding six months and the election shall be held with in such period for the reconstitution of the Committee or the Board, as the case may be." 11. Import of Section 30(1) of the Act, clearly states that if in the opinion of the Registrar or the Government a society is making fault or negligence in performance of its duties imposed on it by the Act, same can be superseded after giving show cause notice to the managing committee. Expression "opinion" used refers the assessment of the Registrar based upon the material to which he is privy or on the basis of enquiry conducted either by him or on his directions. The formulation of the opinion cannot be made only on the basis of an enquiry report or inspection made by an audit party. It can be based upon any other material in addition to such report or inspection conducted by the audit party. The area of formation of opinion is not confined to the report of enquiry or any audit report but any other material to which he is privy or which has come to his knowledge. It can be based upon any other material in addition to such report or inspection conducted by the audit party. The area of formation of opinion is not confined to the report of enquiry or any audit report but any other material to which he is privy or which has come to his knowledge. This is a departure made from the Act of 1960 where the formation of opinion was confined only to the material which has come into existence on the basis of an enquiry report or audit inspection. Now to concretize this issue, the formulation of "opinion" cannot be made only on the basis of an enquiry report or audit report. 12. After having said so, it be seen that in the present case the opinion formation is based upon various instances. The show cause notice reveals various instances of mismanagement, omission and commission committed by the Management. It does not confine itself only to the issues discussed in two enquiry report but makes mention of various instances including the report of Reserve Bank of India which has awarded Grade-III status to the bank for its weak financial Management and highest magnitude of non-performing assets. The opinion formations, as stated hereinabove, is not confined only to the enquiry reports but other materials as well which have been reflected in the show cause notice. After having said so, it be seen as to whether respondents had been given adequate opportunity to seek rectification or correction of the opinion formulated by the Registrar on the basis of various instances quoted in the notice. 13. It is contended in this behalf that after the show cause notice was issued on 11th of December, 2009, seven days time was given to the respondents to file the reply. It is stated by the respondents that the reply submitted by them was not accepted by the petitioner. They say that they had furnished the objections but the office of Registrar refused and declined to accept the same. Before waiting for the reply of the respondents, impugned order came to be passed on 21st of December, 2009. This according to them is clear violation of Section 30(1) of the Act besides violating principles of natural justice. 14. They say that they had furnished the objections but the office of Registrar refused and declined to accept the same. Before waiting for the reply of the respondents, impugned order came to be passed on 21st of December, 2009. This according to them is clear violation of Section 30(1) of the Act besides violating principles of natural justice. 14. There is no dispute that in terms of mandate of Section 30(1) of the Act after formulation of opinion by the Registrar, the Management is to be given a chance to file its objections and after hearing them, the order of supersession can be passed. If the statute is silent regarding the issuance of show cause notice, the rules of natural justice can safely be invoked in this matter. The rules of natural justice is an integral part of rule of law even though not embodied in the statute but fair play in exercise of the administrative power impels the issuance of a show cause notice to the aggrieved party. 15. It is not in dispute that show cause notice was issued to the respondents but what is being stated is that the petitioner-Registrar did not acknowledge the reply filed by the respondents by refusing to entertain the same. There is nothing on record to suggest that the objections were refused to be entertained by the petitioner except a report submitted in the peon book of the Management by the person who is stated to have gone with the reply. No reliance can be placed on such a report. The respondents had an onerous duty of substantiating this plea with some record that their reply was not entertained by the petitioner. In absence of that, no presumption can be drawn that their objections were not entertained. The order impugned has been passed on 21st of December, 2009 i.e. two days after the date to file the objections expired. There is compliance with the mandate of Section 30(1) of the Act. 16. Another aspect of the matter is as to whether respondents have been prejudiced by the order impugned. If this Court assumes that the reply filed by respondents was not accepted even then can it be said that they are prejudiced by non-acceptance of their reply and thus violates the rules of natural justice. The principles of natural justice cannot be put in a straitjacket formula. It has separate facets. If this Court assumes that the reply filed by respondents was not accepted even then can it be said that they are prejudiced by non-acceptance of their reply and thus violates the rules of natural justice. The principles of natural justice cannot be put in a straitjacket formula. It has separate facets. The principle underlining this concept is that the person must show that some prejudice has been caused to him by non-observance of the principles of natural justice. It be seen that this principle has undergone a sea change. The earlier view that even a minor infraction of rules of natural justices would vitiate an order is replaced by the view that the person aggrieved of non-observance of said rules, must show that it has caused some prejudice to him. I am fortified in this view by a judgment of the Apex Court reported in (2006)8 SCC 776 , P.D. Agarwal v. State Bank of India and others. What has been observed by the Apex Court in the above case, may be noticed as under:- "The principles of natural justice cannot be put in a straitjacket formula. It must be seen in circumstantial flexibility. It has separate facets. It has in recent time also undergone a sea change..................... ........................................... The contention of the appellant based on earlier case law that non observance of principle of natural justice itself causes prejudice cannot be said to be applicable in the instant case. The principles of natural justice, as stated earlier, have undergone a sea change. In view of later decisions, the principle of law is that some real prejudice must have been caused to the complainant. The Court has shifted from tis earlier concept that even a small violation shall render the order a nullity. The principle/doctrine of audi alteram partem, a clear distinction has been laid down between the cases where there was no hearing at all and the cases where there was mere technical infringement of the principle. The Court applies the principles of natural justice having regard to the fact situation obtaining in each case. It is not applied in a vacuum without reference to the relevant facts and circumstances of the case. It is no unruly horse." 17. The Court applies the principles of natural justice having regard to the fact situation obtaining in each case. It is not applied in a vacuum without reference to the relevant facts and circumstances of the case. It is no unruly horse." 17. The import of the above judgment clearly reveals that emphasis has been laid on the fact that the party aggrieved by the non compliance of the rules of natural justice, as indicated above, must disclose the prejudice which has been caused by such non-compliance. If no such prejudice has been caused, in that eventuality, the plea regarding the non-observance of rules of natural justice cannot be invoked as the intent and purpose of the rule stands satisfied. 18. By applying the above principle to the facts of the present case, following things can be observed: After the enquiry was ordered by the Registrar and Addl. Registrar, Cooperative Societies, was appointed as Enquiry Officer, he submitted his report after hearing the parties concerned. On receipt of the said report, the Registrar vide communication dt. 19th of Feb’09, informed the respondents about the findings recorded by the Enquiry Officer. The objections were sought from the management which were received by the Registrar, mention of which has been made in the aforementioned communication. After the issuance of the said communication, another communication was addressed to the Managing Director on 24th of April’ 09, vide which he was asked to submit his comments and steps taken by him to plug the loop holes in the working of the Bank. Vide communication dt. 9th of June’09, the Managing Director, was informed that the reply submitted by him was found to be inconclusive and the reasons for the same were also mentioned in the said communication. The show cause notice also details the various instances of omission and commission committed by the Bank. One of the instance quoted is regarding the report of the Reserve Bank of India, and which has found that the financial position of the Bank was weak and it had highest magnitude of non performing assets (NPA). The notice further reveals that no pragmatic steps were initiated by the management to reduce the quantum of NPA and revive the sticky accounts of different parties. 19. The notice further reveals that no pragmatic steps were initiated by the management to reduce the quantum of NPA and revive the sticky accounts of different parties. 19. It is pertinent to mention here that a statutory inspection under Section 35 of the Banking Regulation Act was conducted by the Reserve Bank of India. Perusal of the inspection report reveals various financial irregularities and acts of omission and commission committed by the bank. The report contemplates that the bank has incurred a net loss of Rs.158.52 for the year 2007-08. The bank’s CSR and net NPA’s were assessed at 5.16% and 21.99% respectively. On the basis of this report, the bank has been classified under Grade-III as per RBI instructions in the matter. 20. The statutory report filed by the Reserve Bank of India also indicates net loss of Rs.158.52 lacs which resulted in giving Grade-III to the bank. The opinion is stated to have been formulated by the petitioner independent of the report submitted by the Enquiry Officer. This opinion has been formulated on the basis of the report of the bank. The respondent Management submitted its reply to the said notice issued by the Registrar. Opportunity has been provided to the respondents to submit the reply regarding various acts of omission and commission detected during the course of enquiry conducted by the Additional Registrar. Respondents have submitted their objections which have been considered by the petitioner. This clearly indicates that the respondents have not been taken by surprise while ordering supersession of the management. Any one of the instances quoted in the show cause notice could become the basis for supersession. The respondents were already made aware of these instances and their reply has been received and considered by the petitioner. Under these circumstances, it cannot be said that any prejudice was caused to the respondents. If it is assumed that no opportunity as contemplated under Section 30(1) of the Act has been given to them, even the petitioner-Registrar has complied with the provisions of the said Act by providing an opportunity to the respondents to reply to the show cause notice which they have done as discussed here-in-above. Once there is sufficient material available on the record that the aggrieved party has been fully informed about the acts of omission and commission, it cannot be said that the rules of natural justice have been violated. Once there is sufficient material available on the record that the aggrieved party has been fully informed about the acts of omission and commission, it cannot be said that the rules of natural justice have been violated. The respondents have been provided the opportunity as required under the Act, as such, the order passed by the Registrar does not suffer from any infirmity on this ground. 21. The contention raised by the respondents is that the enquiry conducted under Section 67 was in violation of the Act as the said enquiry was required to be conducted by the Registrar himself. 22. I do not agree with the said contention of the respondents due to the reason that the Registrar has not passed the order only on the basis of the report under Section 67 alone but has taken into consideration the other factors and the material available to him as stated here-in-above. 23. After having said so, it be seen that the basis on which the satisfaction has been arrived at by the Registrar while formulating his opinion cannot be gone into by this court. The only area of investigation required to be done by this court is to see as to whether there was material available on the basis of which said opinion has been arrived at. This court cannot substitute its views regarding the satisfaction arrived at by the Registrar. 24. The other contention raised by the respondents is that the Registrar while superseding the Board, was required to appoint the Administrator vide the same order. 25. While examining this argument, it be seen that what the Act contemplates is that after supersession, the management is to be replaced by an Administrator to run the affairs of the Society. The Act does not contemplate that in the order of supersession, the Administrator should also be appointed. All it contemplates is that the supersession of the management should be followed by appointment of an Administrator. Therefore, the contention raised in this regard by the respondents cannot be accepted. 26. In view of the above, I allow these petitions and set aside the order impugned passed by the Tribunal dt. 5th of April’10. The order of supersession passed by the Registrar, Cooperative Societies, J&K, Jammu, dt. 21st of Dec’09, shall stand restored and the Administrator appointed thereof shall take the charge of the management forthwith. 26. In view of the above, I allow these petitions and set aside the order impugned passed by the Tribunal dt. 5th of April’10. The order of supersession passed by the Registrar, Cooperative Societies, J&K, Jammu, dt. 21st of Dec’09, shall stand restored and the Administrator appointed thereof shall take the charge of the management forthwith. The election of the managing committee shall be conducted within four months from the date of this order. 27. Record be sent back.