GUJARAT STATE COOPERATIVE AGRICULTURE & RURAL DEVELOPMENT v. STATE OF GUJARAT THROUGH PRINCIPAL SECRETARY
2011-06-13
S.R.BRAHMBHATT
body2011
DigiLaw.ai
JUDGMENT: 1. These two petitions contain challenge to the nomination of Government's representative and nomination of Registrar, Cooperative Societies, on the board of the Gujarat State Cooperative Agriculture & Rural Development Bank Limited (herein after referred to as the “Bank” for the sake of brevity) in exercise of power conferred upon the State under section 80(1)of the Gujarat Cooperative Societies Act, 1961 (herein after referred to as the “Cooperative Societies Act” for the sake of brevity). As both these petitions are essentially containing same challenge and their facts are almost identical they were heard together and are being disposed of by this common judgment & order. 2. Facts in brief deserve to be set out as under. 2.1 Special Civil Application No. 223 of 2011 came to be filed by the Gujarat State Agriculture & Rural Development Bank through its Managing Director and 13 others who have been elected as members of the Board of Directors of the Bank. The Bank is registered under the provisions of the Gujarat Cooperative Societies Act and is classified to be a Specified Cooperative Society as defined under section 74 (C) of the Gujarat Cooperative Societies Act. The Board of Directors of the Bank consist of 17 elected directors, one director, i.e. nominee of Gujarat State Cooperative Bank Limited, the Apex Bank and the Registrar of Cooperative Societies, Gujarat State. Thus total 19 members are forming Board of the Bank. The terms of Board of Directors of the Bank was coming to an end hence election of Board of Directors was announced by the City Dy. Collector, Ahmedabad. The election of the Board of Directors was held by the City Dy. Collector, Ahmedabad, and the result was declared on 14/8/2010. The Managing Director of the Bank addressed a communication dated 15/9/2010 requesting City Dy. Collector to give consent for holding meeting of newly elected Board of Directors for electing Chairman & Vice Chairman of the Bank. It is alleged that for three months no consent was accorded and on December 15, 2010, the meeting was directed to be convened on 5/1/2011. The Managing Director of the Bank therefore issued agenda notice indicating that the election for the post of Chairman and Vice Chairman was to be held on January 05, 2011 at 3.00 pm, in the Board Room of the Bank. One gentleman called Mr.
The Managing Director of the Bank therefore issued agenda notice indicating that the election for the post of Chairman and Vice Chairman was to be held on January 05, 2011 at 3.00 pm, in the Board Room of the Bank. One gentleman called Mr. Ishwarbhai Chaudhari approached Learned Nominee of the registrar by preferring dispute under section 96 of the Gujarat Cooperative Societies Act which came to be marked as Dispute No. 3/2011. The disputant mainly contended that the agenda notice was required to be issued by the Collector and as it was not issued by the Collector, calling of the meeting by Managing Director was unlawful and that for holding election requisite procedure of calling for nomination, scrutiny of nominations etc, was not undertaken; and therefore, the process was assailed as illegal. The application for interim relief was also filed praying order restraining concerned from holding meeting on 5/1/2011. the Learned Nominee of the registrar issued an ad-interim order on 4/1/2011 in terms of Prayer-11(A) of the memo of the application and stayed the said meeting. The petitioners have averred in the petition that those proceedings are under challenge in a separate petition and it would not be appropriate to elaborate on those proceedings on the memo of this petition. The order passed by Learned Nominee came to be assailed in the Gujarat State Cooperative Tribunal by the Bank by preferring Revision Application no 3 of 2011 which came to be allowed. However the judgment allowing the Revision Application came to be stayed till January 11, 2011. These proceedings have been challenged before this Court in Special Civil Application No. 25 of 2011 and 26 of 2011. This Court, in these two writ petitions, issued direction in its order dated 6/1/2011 and by way of ad-interim relief directed that meeting of the Board of Directors of the Bank should be convened on 17/1/2011 at 11.00 am in the board room of petitioner no.1 Bank. The agenda notice to this effect was ordered to be issued to all the concerned directors and a public notice was also ordered to be issued in the newspaper, called 'Gujarat Samachar'. A copy of the order dated 6.01.2011 is at Annexure-E to the petition.
The agenda notice to this effect was ordered to be issued to all the concerned directors and a public notice was also ordered to be issued in the newspaper, called 'Gujarat Samachar'. A copy of the order dated 6.01.2011 is at Annexure-E to the petition. The petitioners have alleged in the memo of the petition that as the directors have allegiance with Indian National Congress, the rival political party in power made all attempts for stalling the election of Chairman and vice chairman so as to get time for engineering defection. The Bank is a Central Bank as defined under sub-section (3) of section 2 of Gujarat Cooperative Societies Act, and as per the amended provision of sub section (3) of Section 80 of the Act, State has no authority or power to nominate its representative on the Board. The petitioners came to know through newspaper reports that the Government has nominated respondent no. 4 and 5 on the Board of their Bank hence they preferred this petition on 12/1/2011. 9. It is submitted that even while presuming for the sake of arguments that the contention raised by the petitioners is correct, then also, no elected member of the Bank can go out of purview of by-laws of the Bank itself, which inter alia at by-law No.28 provide as under:- “28. Board of Directors: Management of the Bank shall vest in a Board consisting of the following Directors: (i) one Director shall be nominated by the Gujarat State Cooperative Bank from amongst the members of its Board of Directors provided it holds shares of the Bank to the extent of 1/20th of its paid up share-capital as on 31st March to the preceding year or Rs.5000/- whichever is less. (ii) 3 Directors to be nominated by the Government of whom one shall be the commissioner of the Cooperation and Registrar of Cooperative Societies or its representative. (iii) One Director for each of the District except Dang shall be elected from amongst the members whose names have been entered in the subsidiary registers maintained at the branches situated in the respective Districts. Explanation: Ahmadabad ad Gandhinagar District shall be deemed to be one District for the purpose of this Clause. Bulsar and Dang District shall be deemed to be one District for the purpose of this clause. (iv) Deleted. Managing Director, if appointed, under these by-laws” 10.
Explanation: Ahmadabad ad Gandhinagar District shall be deemed to be one District for the purpose of this Clause. Bulsar and Dang District shall be deemed to be one District for the purpose of this clause. (iv) Deleted. Managing Director, if appointed, under these by-laws” 10. It is submitted that thus, even on presumption that the State Government has no authority in the statute to appoint any nominee members, the By-law of the Society itself, has a provision for nomination of three Directors by the Government and thus, exercise of power by the State Government and thus, exercise of power by the State Government cannot ipso facto be said o be illegal if it merely mentions exercise of powers u/s. 80 in as much as that under thereby-laws of Bank itself, the State Government has the powers to appoint three nominated Board of Directors. 11. It is submitted that a blatant and deliberate attempt on the part of petition no.10 is made to mislead this Court as can be directly inferred by perusal of documents placed by it as Annexure-F at page 76 of paper book. It is submitted that the said statement is an absolute incorrect representation before this Court making changes in title to suit petitioner's contention and to mislead this Court creating a vague picture that the petitioner bank is indulging into advances of credit finances to various small societies. In fact, the original document as issued by the Bank is referring to demand, recovery and deficit of institutional advances / loans and is not a statement of demand, recovery and deficit of any credit cooperative society as is sought to be canvassed. It is submitted that the original statement specifically referring to a char / statement pertaining to institutional advances / loans for different districts is already annexed to with reply of answering respondent. 12. It is submitted that the changes made in document by petitioner is not only limited to the extent of change of title, but it also seeks to exclude major institutional finances viz. Finances made to various Agriculture Produce Market Committees. In fact, the advances / loan extended to societies was given for the purpose of constructing a godown and creation of asset and not for further disbursement to its members since petitioner bank indisputably does not fall under three tier system as defined by the statute. 13.
Finances made to various Agriculture Produce Market Committees. In fact, the advances / loan extended to societies was given for the purpose of constructing a godown and creation of asset and not for further disbursement to its members since petitioner bank indisputably does not fall under three tier system as defined by the statute. 13. It is submitted that the finance which have been given by the Land Development Bank to some of the cooperative societies is not an agricultural finance as stipulated in the aforesaid three tier structure, but some finance given for the use of the society itself for its own purposes and the same can not in any event change the fact that petitioner bank is a society concerned with log term agricultural finance not falling within the definition of 'cooperative credit structure'. It is submitted that even NABARD has also in its communication dated 9/3/2011 unequivocally confirmed that petitioner bank is involved only in Long Term Finances and not Short term finances. 14. It is submitted that so far as party affiliation of answering respondent is concerned, the same is a matter of record and there is no dispute qua he still continuing with the same party that he has always been continuing with It is submitted that so far as election of Bank are concerned, the same is an independent democratic process where elections are contested by individuals without any party symbols or issuance of any mandate by a recognized / registered political party. All members elected through a democratic election process without any party affiliation and even otherwise it is an undisputed fact that majority of elected members belong to party that I belong to and thus also, role of nominated members does not assume any significance. Such averments by petitioner with regard to political affiliation are uncalled for and deserves no consideration of the Court since they are a matter of internal affairs of a political party. 15. At the end the respondent no.6 has submitted that the present petition is devoid of any merits and does not deserve any consideration of the Court over & above the fact that the prayers made therein are already not surviving and the same has become infructuous.” 7. This Court heard learned advocates for the parties and perused the orders impugned.
At the end the respondent no.6 has submitted that the present petition is devoid of any merits and does not deserve any consideration of the Court over & above the fact that the prayers made therein are already not surviving and the same has become infructuous.” 7. This Court heard learned advocates for the parties and perused the orders impugned. Before adverting to the rival submissions of the advocates for the parties, it would be most appropriate to enumerate here under the indisputable aspects emerging therefrom, namely:- 1. Gujarat State Cooperative Agriculture & Rural Bank Limited has produced its bye-laws as amended up to 8/2/2008. A close perusal of these by-laws conclusively establishes that the Bank is governed by Chapter-XI of the Gujarat Cooperative Societies Act, 1961. Chapter-XI contains provision from section 116 to 145. In a way it can be said that it contains specific provisions required to be enacted specially for governing the business, affairs and conduct of Land Development Banks like the Bank in question. The close reading of relevant provision of Cooperative Societies Act would clearly indicate that that the Act contains specific Chapters devoted to deal with a class of cooperative societies like Chapter-X(A) for Insured Cooperative Banks, Chapter-X(D) is for certain other provisions relating to Urban Cooperative Banks. Chapter-VI is for Land Development Banks. 2. The Bye-laws produced by the Bank at page-27 contains clause no. 3(i) which indicate that “to advance loans for the purposes enumerated in section 116 of the Act”. The entire clause-3 unequivocally go to show that this Bank is essentially a Bank governed by Chapter XI of the Cooperatives Societies Act. 3. The Bank initially appears to have been interested in challenging the nomination of Respondent no. 4 and 5 on it's Board and hence a petition being Special Civil Application No. 223 of 2011 came to be filed by the Bank along with 13 elected directors. But as could be seen from the subsequent communication dated 23/1/2011 addressed to their advocate who had filed the petition and to the Registrar of this Court dated 24/1/2011, Bank indicated that it was not interested in pursuing the petition and was desirous of withdrawing the petition as the Bank has accepted position of respondent no.4 and 5 as Government's nomination on the board of directors of the Bank.
The precise averment made in this letter dated 24/1/2011 are required to be set out as under: “ The petitioner no.1-bank has accepted the appointment of the respondents no.4 and 5 as Government nominees of the Board of Directors of the bank. The petitioner no.1-bank is no longer interested in challenging the action of the State Government in appointing the government nominees under section 80 of the Act and, therefore, the petitioner no.1-bank wants to withdraw the aforesaid petition being S.C.A. No.223/2011 qua the petitioner no.1-bank. The petitioner no.1-bank has already informed the concerned advocate who had filed the aforesaid petition on telephone. However, by way of caution, a copy of this letter is also forwarded to the concerned advocate.” In view of this, the petition qua petitioner no.1-Bank stood withdrawn, However on 28/2/2011 respondent no.6 & 10 were permitted to be transposed as respondent no.6 & 7 respectively. 3. The relevant clauses & provisions from the Bye-Law annexed with the petition by the Bank deserves to be set out here under. “ BY-LAWS Of THE GUJARAT STATE CO-OPERATIVE AGRI & RURAL DEVEOOPMENT BANK LTD. “3. Objects: The objects of the Bank shall be: 3. i) To advance loans for the purposes enumerated in section 116 of the Act. 3. ii) To grant loans to any person or persons, corporate body established under any law for the time being in force, on such terms and conditions including nature of security as the Board may decide from time to time. It shall be competent for the Bank to make advances to boring contractors including Co-operative Societies and Panchayats at such rate of interest, and on such terms and conditions as the Board may decide, provide such contractors are members of the Bank. 3. iii) To grant Loans to tenants under the various Land Reforms and Tenancy Acts in force in the area of operation of the Bank. 3. iv) To grant loans to the Co-operative Farming Societies. 3. v) To grant financial assistance to Societies functioning mainly for the purposes of promoting Schemes of land improvement. 3(viii)To buy and sell securities of the Government of India, the Government of Gujarat or other securities specified in clauses (a), (b), (c) , and (d) of Section 20 of the Indian Trust Act, 1882 and to act as Agents for buyers and sellers of such securities. 3.
3(viii)To buy and sell securities of the Government of India, the Government of Gujarat or other securities specified in clauses (a), (b), (c) , and (d) of Section 20 of the Indian Trust Act, 1882 and to act as Agents for buyers and sellers of such securities. 3. x)To grant loans for all such purposes refinanced by National Bank for agriculture and Rural Development and such other statutory bodies of Central and State Government. 4 . The Bank shall have powers to: (a) Float debentures on such terms and conditions as may be approved by Government on the security of its assets and mortgages of immovable property, and also against securities as taken in hypothecation, pledge and charge. (b) Receive deposits and borrow money otherwise than by issue of debentures. c. Acquire such immovable properties and construct such buildings as it may consider necessary for the proper conduct of its business. 5. (a) The membership of the Bank shall be open to: (a) government. (b) All societies registered under the Act in the area of operation of the Bank. (c) All tenants as qualified and eligible for loan under the Saurashtra Land Reforms Act. (d) all other persons. 6 (a) Any person who intends to be enrolled as member, shall make an application in the prescribed form to the Bank or to any of its offices as the Board may prescribe. 11. (a) Every member shall hold atleast one share and every application shall be accompanied with the amount required for shares applied. Every member shall pay an entrance fee of Rs.5 such fee shall be non-refundable. 11. (b) Every individual borrower shall subscribe for shares of the aggregate face value of atleast 5% or more of its total borrowings from eh Bank as the Board may decide. Provided that the Board may prescribe lesser amount for any specified borrowing by the members. 18. Funds to be raised y the Bank: The funds of the Bank may be raised by (a) Share (b) Debentures (c) Government loans and Deposits (d) borrowing from State Bank of Saurashtra or State Bank of India or any other Bank or National Bank for Agriculture and Rural Development (Nabard) or any other statutory corporation or any other Financial Institution under Government Guarantee (e) Non-Government deposits (f) other borrowings (g) fees and (h) donations.
Provided that the aggregate amount of the funds raised under clauses (b), (c) , (d), (e) and (f) shall not exceed four times the aggregate amount of paid-up share capital and reserve fund and building fund minus accumulated losses if any of the bank or such other higher limit as may be sanctioned by the Registrar, Provided further that the total amount due on Debentures and outstanding any time should not exceed the limit prescribed in Section 119 of the Act. 19. Authorized Capital: The authorized and issued share capital of the Bank shall be Rs.1,00,00,00,000/- made up of 10,00,00,000/- shares of Rs.10/- each. The Bank may receive from the Govt. as contribution towards its share capital such sums upon such terms and conditions as may be agreed upon between the Bank and the Govt. 20. Debentures: The Registrar or where the Government appoints any other person in this behalf, such person, shall be the trustee for the purpose of securing the fulfillment of the obligations of the Bank to the holders of the debentures issued by the Bank. All the property of the Bank on the security of which such debentures are issued shall vest in the Trustee. 28. Board of Directors: The Management of the Bank shall vest in a Board consisting of the following Directors: (i) One Director shall be nominated by the Gujarat State Co-operative Bank from amongst the members of its Board of Directors, provided it holds shares of the Bank to the extent of 1/20 of its paid up share-capital as on 31st March of the preceding year of Rs.5,000/- whichever is less. ii. Three Directors to be nominated by the Government of whom one shall be the Commissioner of Co-operation and Registrar of Co-operative Societies or his representative. iii. One Director for each of the district except Dang shall be elected from amongst the members whose names have been entered in the subsidiary registers maintained at the branches situated in the respective districts. Explanation: Ahmedabad and Gandhinanagar district shall be deemed to be one district for the purpose of this clause. Bulsar and Dang district shall be deemed to be one district for the purpose of this clause. iv. DELETED. v. Managing Director, if appointed, under these by-laws.” (5) The relevant provisions of the Cooperative Societies Act also need to be set out hereunder for appreciating their purport in correct context.
Bulsar and Dang district shall be deemed to be one district for the purpose of this clause. iv. DELETED. v. Managing Director, if appointed, under these by-laws.” (5) The relevant provisions of the Cooperative Societies Act also need to be set out hereunder for appreciating their purport in correct context. “2 (3) 'Central Bank'- Means a co-operative bank, the objective of which include the creation of funds to be loaned to other societies. 2. 7)'Co-operati9ve Bank'- Means a society registered under this Act and doing the business of banking, as defined in clause (b) of sub-section (1) of section 5 of the Banking Companies Act, 1949 (X of 1949),' (*7A) “Co-operative credit structure” means (i)the Primary Agricultural Credit Cooperative Societies; (ii) the Central Co-operative Banks; and (iii) the State Co-operative Bank;” (*13A) “National Bank” means the National Bank for Agriculture and Rural Development established under Sec.3 of the National Bank for Agriculture and Rural Development Act, 1981 (LXI of 1981)” 80. Power to appoint Government nominee: (1) Where the State Government has subscribed to the share capital of a society, directly or through another society, or has guarantee the repayment of the principal of an payment of interest on, debenture issued or loans raised by a society, (2) the State Government shall, notwithstanding anything contained in bye-laws of such society, have the right to nominate three representatives in the bye-laws of such society); in such manner as may be determined by the State Government from time to time. The members so nominated shall hold office during the pleasure of the State Government, or for such period as may be specified int eh order by which they are appointed, and any such member on assuming office shall have all rights, duties, responsibilities and liabilities as if he were a member of the committee duly elected. Explanation:- Any combination of the Registrar of his nominee on the Committee of a society under the bye-laws of such society shall not be construed as nomination of the representative on that Committee in exercise of the right of the State Government under this sub-section.
Explanation:- Any combination of the Registrar of his nominee on the Committee of a society under the bye-laws of such society shall not be construed as nomination of the representative on that Committee in exercise of the right of the State Government under this sub-section. (2) Where the State Government is of the opinion that having regard to the public interest involved int eh operation of a society it is necessary or expedient so to do, it may nominate its representatives on the committee of such society as if the State Government had subscribed to the share capital of the society and the provision of sub-section (1) shall, so far as may be, apply to such nomination. (3) Notwithstanding anything contained in this Act or the rules or in the bye-laws, there shall be only one nominee of the State Government in the committee of the State Co-operative Bank or the Central Co-operative Bank where the State Government has subscribed to the share capital of such co-operative banks and no such nomination shall be made where the state Government has not subscribed to the share capital for such co-operative banks and no such nomination shall be made on the committee of a primary Agricultural Credit Co-operative society irrespective of whether the state Government has subscribed to the share capital of a society or not.” CHAPTER-XI LAND DEVERO-MENT BANKS 116. Application for chapter to certain Land Development Banks: 117. Definition: In this Chapter unless the context otherwise requires:- 1. “Land Development Bank” :- means a Co-operative Bank registered or deemed to be registered under this Act, and to which this Chapter applies; (2) “Primary Land Development Bank”: means Land Development Bank recognized as Primary Land Development Bank by the Registrar; (3) State Land Development Bank: means a Land Development Bank for the whole of the State of Gujarat and recognized as such by the Registrar. 118. Appointment, powers and functions of Trustee: (1) The Registrar or where the State Government appoints any other person in this behalf, such person, shall be the Trustee for the purpose of securing the fulfillment of the obligation of the State Land Development Bank to the holders of debentures issued by the State Land Development Bank.
118. Appointment, powers and functions of Trustee: (1) The Registrar or where the State Government appoints any other person in this behalf, such person, shall be the Trustee for the purpose of securing the fulfillment of the obligation of the State Land Development Bank to the holders of debentures issued by the State Land Development Bank. (2)The trustee shall be a corporation sole, by the name of the Trustee for the debentures in respect of which he is appointed and, as such, shall have perpetual succession and a common seal, and in his corporate name may sue and be sued. (3)The powers and functions of the Trustee shall be governed by the previsions of this Act, and the instrument of trust executed between the State Land Development Bank and the Trustee, as modified from time to time by mutual agreement between he State Land Development Bank and the Trustee. 119. Issue of debentures: 1. With the previous sanction of the State Government and the Trustee, and Subject to the rules, the State Land Development Bank in the discharge of its functions issue debentures of such Bank in the discharge of its functions issue debentures of such denominations, for such period, and at such rates of interest, as it may deem expedient on the security of the mortgages, or mortgages to be acquired or partly on mortgages held and partly on those to be acquired and properties and other assets of its land mortgage business. 2. Every debenture may contain a term fixing a period not exceeding thirty years from the date of issue during which it shall be redeemable, or reserving to the committee the right to redeem at any time in advance of the date fixed for redemption after giving to the holders of the debenture not less than three months notice in writing. 3. The total amount due to debentures issued by the State Land Development Bank, and outstanding at any time, shall not exceed:- (a) where debentures are issued against mortgages held, the aggregate of:- (i)the amounts due o the mortgages; ii. the value of the properties and other assets transferred or deemed to have been transferred under section 124 by Development Bank and subsisting as such time and iii.
the value of the properties and other assets transferred or deemed to have been transferred under section 124 by Development Bank and subsisting as such time and iii. the amounts paid under the mortgages aforesaid and he unsecured amounts remaining in the hands of the State Land Development Bank or the Trustee at the time; (b) where debenture are issued otherwise than a mortgages held, the total amount as calculated under clause (a) increased by such portion of the amount obtained on the debenture as is not covered by a mortgage. “120. Guarantee by State Government: The principal of, and interest on, the debentures issued under section 119 shall, to such maximum amount as may be fixed by the State Government and subject to such conditions as the State Government may think fit to impose, carry the guarantee of the State Government” (6) The Bank is certainly not one of the society falling under the definition of “Co-Operative Credit Structure ” as provided under the Section 2 (7-A) of The Gujarat Co-Operative Societies Act 1961. (7) The Government has vide its order dated 1/1/2011 nominated Respondent No.4 & 5 to be member of the Board of Directors of the Bank. (8) The Elections for the post of Chairman and vice chairman are over on 17.01.2011 as ordered by this Court on 6.01.2011 in two writ petitions being SCA 25 and 26 of 2011. (9) The Bank has accepted the nominations and accordingly withdrawn petition being SCA 223 of 2011 qua itself vide it's letters dated 23.01.2011 and 24.01.2011. (10) The petitioner of SCA 2177 of 2011 has lost the election against the present incumbent respondent no. 6 in SCA 223 of 2011. (11) The petitioner of SCA 2177 of 2011 has filed the petition in his individual capacity and not by or on behalf of the Bank. (12) The petitioner of petition no. 2177 of 2011 has placed on record the Government Resolution dated 7.01.1994 nominating the Respondent No. 2 by designation to be member of the Bank's Board till further orders and no material is placed on record to indicate in any manner that it has come to an end. (13) On the contrary the said GR dated 7.01.1994 is said to have been in operation where under the respondent no.
(13) On the contrary the said GR dated 7.01.1994 is said to have been in operation where under the respondent no. 2 in SCA 2177 of 2011 appears to have acted as nominated member on the Board of the Bank. (14) The remaining petitioners of SCA 223 of 2011 also do not have any authority from the Bank to continue with the petition rather the Bank has made specific request for permitting it to withdraw the petition qua itself accordingly now the remaining petitioners in that petition also cannot claim any legitimate right to voice grievances on behalf of the corporate body like the Bank. 8. Against the aforesaid backdrop of indisputable aspects now let us examine closely the contentions raised by learned counsels of the respective parties. 9. A close perusal of the provisions of Section 2 (3), 2 (7), and 2(7-A), would go to show that all Co- operative Banks as defined under provisions of Section 2(7) are not essentially “Central Bank” forming part of the “Co- operative Credit Structure” as came to be defined for the first time under provisions of Section 2(7-A) of the Cooperative Societies Act 1961. A 'Co-operative Bank ' as defined under Section 2(7) of the Act is certainly a registered society doing business of banking as defined in clause (b) of Sub clause (1) of Section 5 of the Banking Companies Act 1949. This Co- operative Bank, as such, if has no further qualification or attributes of objective of creation of funds to be loaned to other societies than, it would not be covered by the definition of “Central Bank” as provided under Section 2(3) of the Cooperative Societies Act and in turn not form part of the “Co-operative Credit Structure” as defined under section 2(7-A) of the Cooperative Societies Act. 10. The legislature has, by introducing new subsection (7-A) in section 2, in the Gujarat Cooperative Societies Act 1961 for the first time recognized and provided for existence of “Cooperative Credit Structure” consisting of three tiers namely (i)the Primary Agricultural Credit Cooperative Societies being the primary tier or the first rung in the ladder, (ii) the Central Co-operative Banks, being second tier or middle rung in the ladder. And (iii) The State Cooperative Bank, the apex tier or third rung in the ladder.
And (iii) The State Cooperative Bank, the apex tier or third rung in the ladder. After recognizing and providing for this three tiers system by way of the one of the provisions of Gujarat Act 1 of 2008 the legislature made various provisions for the first time for making it work in accordance with the objective for creating it, in the very same Gujarat Act 1 of 2008 as could be evident from the various new provisions came to be inserted at various places in the Gujarat Co-Operative Societies Act 1961. 11 It would be expedient to refer to some of the provisions which came to be inserted by way Gujarat Act 1 of 2008 into the Gujarat Cooperative Societies Act 1961 for facilitating smooth working of the “Cooperative Credit Structure” for its defined objective. The legislature has provided for regulating membership in the Primary Agricultural Credit Cooperative Society by inserting subsection 4 and 5 into Section 22 without mentioning words “ Co-operative Credit Structure” whereas the legislature has, by inserting new section being Section 44-A made express provisions defining powers of Committee of Cooperative Credit Structure, which inures only for the societies forming part of the “Cooperative Credit Structure” and no other Co-operative society or Co-operative Bank can claim those powers contained in Section 44-A of the Cooperative Societies Act 1961. Though provisions of section 45 as it stood originally contain general restrictions on societies' loan making powers but by inserting subsection (3) in section 45 a special provision is made so far as the Primary Agricultural credit Societies are concerned without specifically mentioning “ Co-operative Credit Structure” in the entire section 45. Chapter V of the Gujarat Co-operative Societies Act 1961 captioned as “State Aid to Societies” contains provisions from Section 51 to section 64. the legislature has made only one amendment in form of proviso to subsection (2) of Section 51 of the Gujarat Co-operative Societies Act 1961 by statutorily regulating State's discretion of subscribing to the shares capital of cooperative societies covered by “co-operative credit structure” which is otherwise not found in case of societies not forming part of the Co-operative Credit Structure. 12.
12. The provisions of Section 64 gives overriding effect to the provisions of Chapter V of the Co-operative societies Act, It specifically provides that the provisions of section 52 to 62 (both inclusive) in the Chapter V shall have effect notwithstanding therewith contained in any other law for the time being in force. The Gujarat Act No. 1 of 2008 has not made any change to this provisions and therefore provisions of section 80 (3) are to be construed bearing in mind the non obtante provision of Section 64 of the Act, which gives over riding effect to the provisions of Section 52 to 62 of the Gujarat Co-operative Societies Act 1961 not only on the provisions of the Cooperative societies Act, Rules and Bye laws but also upon provisions of other law time being in force. 13. The legislature has made special provisions in form of Chapter XI captioned as “ Land Development Banks” containing section 116 to 154 in the Gujarat Co-operative societies Act 1961. The provisions of Section 116 makes it amply clear that the said chapter applies to “Land Development banks” advancing loan other than short term loans for the purpose mentioned therein. I have already in detail set out relevant bey-laws of the Bank and other provisions of Chapter XI hence I need not repeat the same here under but collective reading thereof would go a long way to establish that the Bank is essentially a Co-operative Bank governed by the provisions of Chapter XI and especially section 116 to 154 and it is not certainly a part of the “Co-Operative Credit Structure” as defined under the provisions of Section 2(7-A) of the Gujarat Cooperative societies Act 1961. 14. Thus close reading of the aforesaid provisions contained in Gujarat Cooperative Societies Act, 1961, it becomes clearer that the Land Development Banks are certainly not forming part of the Co-operative Credit structure as defined under section 2 (7A) of the Act. The Land Development Banks have different set of regulations in the form of previsions made under Chapter-XI of the Cooperative Societies Act. The Legislature has very succinctly provided even definition clause in that very chapter which would lend a distinct character to the Land Development Banks which are certainly not part & parcel for the Cooperative Credit Structure as defined under section 2 (7A) of the Cooperatives Societies Act. 15.
The Legislature has very succinctly provided even definition clause in that very chapter which would lend a distinct character to the Land Development Banks which are certainly not part & parcel for the Cooperative Credit Structure as defined under section 2 (7A) of the Cooperatives Societies Act. 15. The provisions of section 80(1) of the Gujarat Co-operative Societies Act 1961 empowers State government to nominate its three representatives in the committee of a cooperative society in the following eventualities namely (i)where the Government has subscribed to the share capital of a society, directly or through another society, or (ii) where the Government has guaranteed the repayment of the principal of and payment of interest on, debentures issued or loans raised by a society. The members so nominated shall hold office during the pleasure of the State Government , or for such period as may be specified in the order by which they are appointed. The explanation provides that any nomination of the Registrar or his nominee on the committee of a society under the bye-law of such society shall not be construed as nomination of the representative on the committee in exercise of the right of the State Government under this subsection. The sub-section (2) of Section 80 empowers the State to exercise it's powers of nominations to a society even if the Government has not subscribed to its share capital or not guaranteed repayment of loan or interest but it forms an opinion to the nomination is warranted in public interest. In the instant case this court need not dwell much upon the purport of provisions of sub-section (2) of Section 80 as admittedly the State has not invoked sub-section (2) of Section 80 while nominating respondent No. 4 and 5 and the Registrar Co-operative Societies on the Board of the Bank. 16. Thus State's power to make nomination in the committee of a cooperative society was statutorily recognized and accepted. However for the first time by way of addition of Sub-Section (3) to Section 80 an exception was carved out. This exception therefore is required to be construed strictly in accordance with the established principles of law. The plain reading thereof indicates that the State's statutory power to make nomination in the Board or committee of a society is restricted and regulated in case of type of cooperative societies and eventuality mentioned therein.
This exception therefore is required to be construed strictly in accordance with the established principles of law. The plain reading thereof indicates that the State's statutory power to make nomination in the Board or committee of a society is restricted and regulated in case of type of cooperative societies and eventuality mentioned therein. The sub-section (3) of Section 80 being in nature of exception to the discretion contained in Section 80 needs to be construed strictly. The said subsection (3) of Section 80 provides that notwithstanding any thing contained in the cooperative societies Act, or the rules or in the bye-laws there shall be only one nominee of the State government in the committee of the State Co-Operative Bank, or the Central Co-Operative Banks, where the State Government has subscribed to the share capital of such co-operative banks, and no such nomination shall be made where the State Government has not subscribed to the share capital of such co-operative bank and no such nomination shall be made on the committee of a Primary Agricultural Credit Co-operative Society irrespective of whether the State Government has subscribed to the share capital of a society or not. Thus out of total two eventualities envisaged under Section 80 (1) namely (i) State government's subscribing to the share capital of a society, directly or through another society, or (ii) the Government's guarantee for repayment of the principal and payment of interest on, debentures issued or loans raised by a society for exercising powers of nominating its representatives under Section 80(1) of the Gujarat Cooperative Societies Act 1961, only one eventuality is referred to and relied upon for restricting and regulating the State Government's Powers to appoint nominees on the committee of a society under Section 80 (1) of the Act. The subsection (3) of section 80 is conspicuously silent so far as the second eventuality of State government's guarantee on repayment of principal or payment of interest by a society is concerned. In other words the provisions of subsection (3) of Section 80 do not regulate or restrict the State Government's discretion of nominating its representatives in the committee of a society where it has guaranteed repayment of principal or payment of interest of loan or debentures. 17.
In other words the provisions of subsection (3) of Section 80 do not regulate or restrict the State Government's discretion of nominating its representatives in the committee of a society where it has guaranteed repayment of principal or payment of interest of loan or debentures. 17. The restriction containing in subsection (3) of Section 80 upon the State Government's discretion in nominating its representatives in the committee of a co-operative society, share capital whereof is subscribed by the Government cannot be stretched further so as to encompass the eventuality of State Government's guarantee for repayment of principal or payment of interest by that society as that eventuality is not covered by the provisions of subsection (3) of section 80 of the Gujarat Co-operative Societies Act 1961. To read that eventuality into subsection (3) of Section 80 would amount to reading what is not provided by the legislature. The Court is not to undertake an exercise of reading casus omissus in the provisions of law where there is none and attempt to provide something which is not even envisaged by legislature as it could be seen from the plain language of the provision. 18. Thus assuming for the sake of examining the submission of the petitioners, without holding, that the Bank in question is “Central Bank” and as such it is entitled to receive benefit of employment of phraseology of “the Central Co-operative Banks” in subsection (3) of section 80 without it being required to be part of “Co-operative Credit Structure” as defined under Section 2(7-A), which it is admittedly not, than also on account of plain and simple reading of subsection (3) of Section 80 it can be said that the Bank in question would certainly not be covered by the exception only on account of State Government's non subscription to it's share capital in absence of any evidence that the State has not in any way guaranteed any repayment of principal or payment of interest on behalf of the Bank. On the contrary the the petitioner's advocate has in his written submission mentioned as under “ The contention of giving loan by bank to other societies stand admitted as the said facts has been in the affidavit in reply filed by the respondent no. 6, therefore ,the bank is raising the funds and giving loan to other societies is not disputed one.
6, therefore ,the bank is raising the funds and giving loan to other societies is not disputed one. Therefore the status of the bank as a central cooperative bank is undisputed one rather it is admitted. Sub-section 1 of section 80 empowers the Government to appoint three nominees on the Board of the Directors of the society where the State Government has given guarantee. The facts undisputed are that the bank has raised loan from NABARD and given a guarantee, therefore, in absence of provisions of sub-section (3) of section of the State , State would have power to nominate 3 directors on the Board, however said power stand abrogated in view of the special provision made in sub section (3) of 80 of the Act which is enacted at later point of time..i.e. By Act No.1 of 2008.” ( the emphasis supplied). Thus from the aforesaid it becomes clear that the second eventuality of State Government being guarantor or giving guarantee for repayment of principal or payment of interest being not covered under the provisions of sub-section (3) of section 80 the bank in question did not have any right to challenge the nominations made by the State government. 19. The petitioner of SCA 2177 of 2011 has in fact no independent right of challenging the continuation of respondent no.2 I.e. The Registrar Co-operative Societies. The main ground of challenge being the provision of subsection (3) of Section 80 of the Gujarat Co-operative Societies Act 1961 no further separate elaborate reasoning is required to be resorted to as the aforesaid discussion would answer the contention. 20. The second submission in SCA 2177 of 2011 against the continuation of respondent no. 2 on the Board of the Bank, being non issuance of fresh nomination orders in favour of the respondent no. 2 by the State, also doest not merit is elaborate discussion. The provisions of Section 80 (1) read with the Government GR dated 7.01.1994 would make it clear that there was no requirement of issuance of any fresh orders renominating the Registrar Co-operative Societies as one of the members on the Board of the Bank. The Bank's bye-law and the stands taken by the Bank coupled with the plain reading of provisions of Section 80(1) would be sufficient to negative the second contention made in the petition being SCA 2177 of 2011. 21.
The Bank's bye-law and the stands taken by the Bank coupled with the plain reading of provisions of Section 80(1) would be sufficient to negative the second contention made in the petition being SCA 2177 of 2011. 21. The Court at this stage would also like to observe that this Court has held in group of writ petitions being Special Civil Application No. 5583 of 2011 and allied matters, that except the Cooperative Society, a body corporate by virtue of section 37 of the Gujarat Co-operative Societies Act 1961, none has any right whatsoever to challenge the action which in fact is the action to be complained of only by the Society as such . The nomination if at all is not acceptable by the society than the society as a body corporate has to challenge the same. This right of challenge, nomination need not be stretched to the individual members independent of society whose bye-laws are binding on them. 22. The decisions cited at the Bar are pertaining to exercise of power under section 80(2) of the Gujarat Cooperative Societies Act. That being not the question here, said section is of no avail to the petitioners, and even the State has not contended that they have appointed nominee in exercise of power under section 80(2) of the Gujarat Cooperative Societies Act, 1961. 23. From the aforesaid discussions the following conclusions could be made, namely:- (1) The Bank in question cannot be said to be entitled to raise maintainable challenge against the order of nomination only on the strength of sub section (3) of Section 80 of the Gujarat Cooperative Societies Act, 1961, as sub section (3) of section 80 does not cover the Cooperative Bank for whom the State has guaranteed repayment of principal or payment of interest etc. (2) The petitions are capable of being rejected only on the aforesaid ground. However it would be appropriate at this stage to note that the right to challenge the order of nomination inures in favour of the Bank as a body-corporate and does not inure in favour of any individual member independent of the Bank as a body-corporate.
(2) The petitions are capable of being rejected only on the aforesaid ground. However it would be appropriate at this stage to note that the right to challenge the order of nomination inures in favour of the Bank as a body-corporate and does not inure in favour of any individual member independent of the Bank as a body-corporate. Therefore on this count also it is required to be noted that the petitioners in light of the letters addressed by the Bank on 23/1/2011 and 24/1/2011 did not have right to maintain the petition contrary to the stand taken by the Bank which is reflected in its above said two letters. (3) The petitioner in Special Civil Application No. 2177 of 2011 also has not been supported in any manner by the Bank, as body-corporate capable of being sued and sue, could not have maintain petition challenging continuation of respondent no.2 the Registrar, Cooperative Societies on the board of the Bank. The main ground on which the continuation is challenged was insertion of sub section (3) in section 80 of the Gujarat Cooperative Societies Act, 1961, and as this Court has negatived the petition being Special Civil Application No. 223 of 2011 on identical challenge, the Court is of the view that the same reasoning would apply for rejection of this petition also. Moreover the additional ground urged into service that the respondent no.2 Registrar could not have acted as a member of the board in absence of fresh nomination orders would be not tenable in view of the explicit language of section 80 (1) of the Act. Thus reading with the bye-laws of the Bank and the provision of section 80(1) it can be said that there was no requirement on the part of the State for issuing fresh nomination as the G.R. Dated 7/1/1994 is still in force and not shown to have been repealed or recalled. 24. In view of the aforesaid conclusions, both the petitions being bereft of merits are required to be dismissed and are accordingly dismissed. Interim relief, if any granted earlier, shall stand vacated.