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2024 DIGILAW 198 (KAR)

Lakshmane Gowda v. Joint Registrar of Co-Operative Societies

2024-03-07

C.M.POONACHA

body2024
ORDER : C.M. Poonacha, J. The present petitions are filed to quash/set aside the order bearing No.JRB/RGN/Vibhajana/45/2014-15, dated 5.1.2015 passed by the second respondent - Joint Registrar of Cooperative Societies. 2. The relevant facts necessary for consideration of the present petitions are that, a society by name "The Aircraft Co operative Society Limited" (hereinafter referred to as 'the Society/Parent Society') was registered under the Mysore Co-operative Societies Act, 1948, on 4.2.1954 and the employees and officers working at the Hindustan Aircrafts Limited (HAL) were its members. 3. The petitioners in the writ petitions are the members of the Society. It is the case of the petitioners that initially the Society was to advance various types of loans to its members. Subsequently, the objects of the society were amended and housing activities were included in the byelaws vide amendment dated 18.12.1964. It is the further case of the petitioners that a proposal to bifurcate the society by splitting the objectives to be taken over and run by two independent Co-operative societies i.e., one for the credit facilities and another for the housing activities was made and in the Annual General Meeting (AGM) held on 14.9.2014, the said aspect i.e., bifurcating the society was listed as an agenda. 4. It is the contention of the petitioners that the said AGM held on 14.9.2014 was fraught with various illegalities. In the said meeting, a resolution was passed for bifurcation of the Society and two letters dated 12.11.2014 were addressed to the second respondent - Joint Registrar to approve the byelaws of the two bifurcated societies. Various information were sought, consequent to which by an order dated 5.1.2015 the second respondent approved the bifurcation of the society into 'The Aircraft Employees Credit Co-operative Society' (hereinafter referred to as 'the credit society') and 'The Aircraft Housing Co-operative Society (hereinafter referred to as 'the housing society') and administrators were appointed to the said societies. Being aggrieved by the said order dated 5.1.2015 the present writ petitions are filed. 5. Learned Senior Counsel, Sri. Being aggrieved by the said order dated 5.1.2015 the present writ petitions are filed. 5. Learned Senior Counsel, Sri. K.Suman and learned Counsel, Smt. Vidyulatha appearing for the petitioners contend that although there are various factual irregularities with regard to the manner in which AGM held on 14.9.2014 was conducted, as also the fact that the members of the parent society were not made known the agenda with regard to bifurcation, a primary contention put-forth on behalf of the petitioners is that the requirement under Section 14(4) of the Karnataka Co-operative Societies Act, 1959 (hereinafter referred to as 'the Act') has not been followed inasmuch as the notice ought to have been issued by the parent society. However, in the present case the notice has been issued by the bifurcated societies. It is further contended that an omnibus order has been passed vide the order dated 05.01.2015 which could not have been passed having regard to the scope of Section 14(4) of the Act. It is further pointed on behalf of the petitioners that this Court by orders dated 27.3.2015 and 8.9.2015 passed in WP.No.12188/2015 had specifically ordered that the functioning of the bifurcated societies shall be subject to the result of the writ petition. It is also contended on behalf of the petitioners that the total number of members of the parent society are 13745 and as per Rule 14A(j)(5) of the Act, the quorum is 20% of 2749 members and that in the AGM held on 14.9.2014 only 1955 members attended the meeting. Hence, the said meeting did not have the requisite quorum. Hence, they seek for allowing of the writ petitions and setting aside of the order dated 5.1.2015. 6. Learned Senior Counsel, Sri. Jayakumar S.Patil appearing for respondent Nos.3 and 4 i.e., the bifurcated societies submits that although there is no strict compliance of the mandate as stipulated under Section 14(4) of the Act, in the ultimate analysis it is open to the petitioners to opt to join either of the societies and if they are not agreeable to the same, their membership amount would be returned. With regard to the contention of the petitioners that there was no quorum, the respondents rely on Section 27(4) of the Act, which stipulates that the quorum of the General Meeting shall be as specified in the byelaws, but not less than 1000 or 10%, whichever is less. With regard to the contention of the petitioners that there was no quorum, the respondents rely on Section 27(4) of the Act, which stipulates that the quorum of the General Meeting shall be as specified in the byelaws, but not less than 1000 or 10%, whichever is less. Hence, he seeks for dismissal of the writ petitions. 7. Learned AGA supporting the order dated 5.1.2015 submits that the second respondent merely acceded to the request made by the society pursuant to the resolution passed in the AGM held on 14.9.2014 and that, the order dated 5.1.2015 is just and proper. 8. The submissions made on behalf the parties have been considered and the material on record has been perused. The question that arises for consideration "whether the order dated 5.1.2015 is contrary to law and liable to be set aside?". 9. Before considering the rival contentions, it is necessary to notice the relevant necessary statutory provisions: 9.1 Section 14 of the Act provides for Amalgamation, transfer of assets and liabilities and division of co-operative societies. 9.2 Section 14(1) stipulates that a co-operative society, by a resolution passed by two-thirds majority of the members present and voting at a general meeting may divide itself into two or more societies, or transfer its assets and liabilities by a resolution. 9.3 Under Section 14(2) it is open for two or more societies to amalgamate themselves and form a new co-operative society by a resolution passed by two-thirds majority of its members at a general meeting. 9.4 Section 14(3) stipulates that any resolution under Sub-section (1) or (2) of Section 14(1) shall contain all the particulars of transfer, division or amalgamation and shall not have any effect unless approved by the Registrar. 9.5 Sections 14(4), 14(5), 14(6) and 14(7) read as under: "(4) When a co-operative society has passed any such resolution, and it has been approved by the Registrar, the co-operative society shall give notice thereof in writing to all its creditors and such members of the society as did not vote in favour of the resolution and, notwithstanding any bye-laws or contract to the contrary, any creditor or any member to whom such notice is given shall during the period of one month from the date of service of the notice upon him, have the option of withdrawing his shares, deposits or loans, as the case may be. (5) Any member or creditor who does not exercise his option within the period specified in sub-section (4) and every member who has voted in favour of the resolution shall be deemed to have assented to the proposals contained in the resolution. (6) A resolution passed by a co-operative society under this section shall not take effect until either, - (a) the assent thereto of all the members and creditors has been, or deemed to have been, obtained under this section or; (b) all claims of members and creditors who exercise the option referred to in sub-section (4) within the period specified therein, have been met in full. (7) Where a resolution passed by a co-operative society under this section involves the transfer of any assets and liabilities, the resolution shall, notwithstanding anything contained in any law for the time being in force, be a sufficient conveyance to vest the assets and liabilities in the transferee without any further assurance." (emphasis supplied) 10. It is clear that Section 14(4) of the Act specifically mandates that, when a resolution has been passed and approved by the Registrar, the co-operative society shall give notice thereof in writing to all its creditors and such of the members of the society, who did not vote in favour of the resolution. The contention put-forth on behalf of the petitioners is that the notice as provided under Section 14(4) has not been given by the Society. 11. It is not in dispute that consequent to the resolution passed by the society in its AGM held on 14.9.2014 and the order dated 5.1.2015, the notice as required under Section 14(4) of the Act has been given by the bifurcated societies and not by the parent society and hence, to that extent there is non-compliance of Section 14(4) of the Act. 12. It is further contended on behalf of the petitioners that when a statute stipulates a thing to be done in a particular manner, the same is required to be done in the said manner. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Union Bank of India v. Sunview Assets Private Limited, (2023) 10 SCC 232 wherein the Hon'ble Supreme Court held as follows: "28. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Union Bank of India v. Sunview Assets Private Limited, (2023) 10 SCC 232 wherein the Hon'ble Supreme Court held as follows: "28. Now, it is well-settled proposition of law that when a statute requires a particular thing to be done in a particular manner, it must be done in that manner or not at all, and other methods of performance are necessarily forbidden." (emphasis supplied) 13. It is the contention of the bifurcated societies that consequent to the order dated 5.1.2015, notices dated 24.1.2015 and 4.2.2015 have been issued by the Administrators of the bifurcated societies and paper publication has also been taken. It is the further contention on behalf of the bifurcated societies that the members have been notified of the bifurcation and the persons who were interested in getting a site or persons who were earlier allotted sites or who have paid consideration towards the sites were to be members of the House Building Society and those who had neither applied for a site nor paid any amount towards the site nor have taken a loan were to be continued as members of the Credit Society and the persons who have not availed of any benefit would continue in the Credit Co-operative Society. It is contended that, the petitioners, consequent to notice to be issued to them under Section 14(4) of the Act would, at best be, entitled to exercise the option as contemplated under the said provision. It is the further contention of the bifurcated societies that various acts have been done consequent to the bifurcation. 14. Learned Senior Counsel appearing for the bifurcated societies relies on a Constitution Bench judgment of the Hon'ble Supreme Court in the case of Daman Singh v. State of Punjab, (1985) 2 SCC 670 to contend that, once a person becomes a member of a co-operative society he loses his individuality qua the society and he has no independent right except those given to him by the statute and byelaws. The said judgment is sought to be distinguished by the petitioners by pointing out that the said finding recorded by the Hon'ble Supreme Court is having regard to the contention put-forth by the petitioners in the said case that the amalgamation of a society contravenes Article 19(1)(c) of the Constitution of India, which guarantees to citizens the right to form associations and unions. Further it is pointed out that in the said case, the statute i.e., the Punjab Co-operative Societies Act had provided for compulsory amalgamation of the co-operative societies. 15. It is forthcoming from the aforementioned that the resolution has been passed by two-thirds majority of the members present. Further, the Registrar has passed the order dated 05.01.2015 approving the resolution. The process up to the stage cannot be faulted. 16. It is further relevant to note that Section 14(4) of the Act mandates that the notice consequent to resolution approved by the Registrar ought to be issued by the original society which admittedly, in the present case has not been done. 17. In the present situation, in order to adjudicate upon the right of the petitioners vis-a-vis the relief that can be granted, it is relevant to note that the notice under Section 14(4) of the Act is required to be issued to all the creditors and such members who did not vote in favour of the resolution and upon such notice, the noticees are entitled to withdraw their shares, deposits or loans within one month from the date of service of the notice, as the case may be. It is further forthcoming from sub Section (5) of Section 14 of the Act that if the member or creditor does not exercise his option within the period specified in sub Section (4) of Section 14 of the Act, the notice is deemed to have assented to the proposals contained in the resolution. It is further stipulated under sub Section (6) of Section 14 that the resolution passed by a Co-operative Society under Section 14 of the Act shall not take effect until either the assent of all members and creditors has been or deemed to have been obtained under this Section or all claims of members and creditors who exercise the option of withdrawing their shares, deposits or the loans have been met in full. 18. 18. It is forthcoming from the aforementioned, that merely because the notice as per Section 14(4) of the Act has not been issued, at best, the same is as an irregularity in respect of which the relief is required to be moulded in the present writ petition. 19. The non issuance of notice by the parent Society is required to be held as an irregularity having regard to the fact that once a person becomes a member of the Society, he loses his individuality and is bound by decisions taken by the Society in accordance with law. However, the process of bifurcation is required to be completed so that the measures stipulated under sub Section (4) and (5) of Section 14 of the Act are completed in accordance with law. 20. The contention of the petitioners that the quorum of the AGM was less than 20% is required to be rejected having regard to the specific stipulation contained under Section 27(4) of the Act that the quorum shall not be less than 1000 or 10%, whichever is less. 21. The various other contentions sought to be made by the petitioners with regard to the factual assertions as to the conduct of the AGMs have to be viewed from the assertions of the contesting respondents that the AGMs have been conducted in accordance with law. Hence, the same being disputed questions of fact, cannot be adjudicated upon in the present writ petitions. 22. Although, it is the vehement contention on behalf of the Petitioners that the bifurcation of the society not being in accordance with Section 14(4) of the Act and the functioning of the bifurcated Societies being subject to the result of the present writ petition, the bifurcation of the Society is required to be set aside is not liable to be accepted having regard to the finding recorded herein above that non compliance of Section 14(4) of the Act could, at best, be an irregularity. 23. Having regard to the aforementioned, the question of granting the relief as sought for by the petitioner in the writ petition i.e., for quashing/setting aside of the order bearing No.JRB/RGN/Vibhajana/45/2014-15 dated 05.01.2015 does not arise. 23. Having regard to the aforementioned, the question of granting the relief as sought for by the petitioner in the writ petition i.e., for quashing/setting aside of the order bearing No.JRB/RGN/Vibhajana/45/2014-15 dated 05.01.2015 does not arise. However, the present writ petitions are disposed of by directing; i) The Registrar of Co-operative Societies to issue notice to the Petitioners on behalf of the parent Society notifying them the stipulations as contemplated under sub-section (4) of Section 14 of the Act. (ii) Upon their response, the Registrar shall adjudicate upon the same and also decide as to the proportion in which the bifurcated Societies shall be liable to satisfy the claim of the Petitioners. (iii) The Registrar shall do the needful and submit the compliance report to this Court within three months from today.