UTIAR PRADESH CO-OPERATIVE FEDERATION A v.

THE STATE OF U.P. & ORS.

January 19, 1973

[S. M. SIKRI, C.J., A, N. RAY, D. G. PALEKAR, M. H. BEG AND

S. N. DWIVEDI, JJ.J

U.P. Cooperative Societies Act, 1965 (Prior to amendment by U.P.

Act No. 1 of 1972) & Rules-Stt.:te Government power to nomintile upfo 2/3rds of total number of .menibers of the committee of the managemenr.

U.P. Cooperative Societies Rules 1968-Reductionof share capital

uless a member is removed acco; ding to Rules share clipit(, ll not affected.-Shares ke, pt in ecurity remained in specie-No reduction of share capitc .. l.

The petitioner challenged the order passed by the U.P. State GoVi:rn- ment an 26-1-1971 nominating 2/3rds of the total number of members of the committee of the management of the petitioner purp6rting to act under section 34 of the U .P. Cooperative Societies Act,

1965. The subscribed paid up capital of the Federation o, n 30-6-1969 was Rs. 34. 04 lakhs.

Of this, the Slate Government owned shares of the value of Rs. 20 lakhs. The percentage of the State Government in the share holding was 58. 75%.

The State Government's contention was that the membership of some co-operative bank had been U!rmioated a!Dd. thel'efore the share capital was reduced by Rs. 53,000/-. The State Government also contended that another member.

District C.ooperative Federation, Saharanpur retired Rs. 50,000/- out of his share capital with the Federation. The State Government, therefore, claimed that its share holding had gone to 60% and, thel'efore, had a right under s. 34 to nominate its nominees to .the comqiittee of the management.

The petitioner challenged the order on the ground that the condition precedent of the State Government holding 60% of the sh-ares in the share capital of the Federation was :not fulfilled.

It also raised several other grounds including tbe constitutional validity of Sec. 34 of the Act.

Allowing the writ petition, HELD : (i) The p'rovisions of the Act and Rules indicate that the co-operative banks did not cease to be the members. as there Was no resolution removing the b3!1>ks from membership. Rule 3 2 indicates that there is no reduction of share capital as the shares of the bank& were not transferred to any other pel'son. The shares still stood in the name of the co-operative banks and the share capital was not reducod by Rs. 53,000/-.

[408H; 409A-CJ

(ii) Saharanpur District Cooperatiye Federation was still a member,

as it was no't removed from membeTship.

It share mQOCy cannot . be taken out of share capital fund god treated as security money. The shares were not kept in security.

Even if the shares were in seity, the shares remained in specie. The share capital of the petitioner. was not reduced by Rs. 50,000/·. [409F-H; 410A--C]

(iii) As the shares in both the cases were still part of the share capitlll, the State Government was not justified to exercise right ilnder section 34 of the Act.

[410D-F]

ORIGINAL/CIVIL APPELLATE JURISDICTION : Writ Petition C No. 243 of 1971 and Civil Appeal No. 592 of 1972.

Writ Petition No. 243 of 1971

Petition 11nder Article 32 of the Constitution of India for the enforcement of fundamental rigbts and Civil Appeal No. 592 of 1972.

Appeal py a special leave from the judgment and order dailed December 8, 1970 of the Allahabad High Court Civil Misc. Writ No. 4700.

A. K. Sen, A. P. Singh Chauhan, V. C. Prashar and Dluiram Pal Singh Chauhan, for the petitioner .and appellant.

C. K. Daphtary, B. Sen and 0. P. Rana, for respondents Nos. 1-4, 10-11 (in W.P. No. 243) and respondents Nos. 1 & 2 (in F C.A. No. 592).

The Judgment of the Court was delivered by

RAY, J.-The Civil Appeal is by special leave from the judgment dated 8 December, 1970 of llhe High Court at Allahabad G dismissing the petition of the appellants. The appellants in 'the Allahabad High Court impeac!ted the first order dated 19 September, 1970 passed under section 34 of the Uttar Pradesh Cooperative Societ.ies Act, 1965 referred to as the Act nominating

two-thirds o( the total number of members of the committee of management of the Uttar Pradesh Co-operative Federation. The H apiJellants are the Uttar, Pradesh Co:operative Peileration. itd., Luckn9w referred to as the .Federation and.Veerpal Singh w)!O are both also the petitioners. in the writ petitio~ .

This writ petition is directed. against the second order of. the Uttar Pradesh State Government dated 26 June, 1971 passed under section 34 of the Act nominating two-thirds of the total number of members of the committee of management of the Federation.

The question which falls for determination in the writ petition and the civil appeal is whether the State Government under section 34 of the Act could nominate two-thirds of the total number of members of the committee of management of the Federation.

The annual general meeting of the Federation was held on 30th March 1970. The committee of management of the Federa-

\ A

tion was elected at the annual general meeting.

The appellant c petitioner Veerpal Singh on 8 April 1970 was unanimously elected as Chairman of the Federation.

On 19 September, 1970 the State Government passed an order under section 34 of the Act and nominated two-thirds of the members of the committee of management of the Federation. It may be stated here that under section 34 of the Act where the D share capital subscribed to by tho State Goveinment is ,60 per tent or more of the total share capital of the co-operative society the State Government shall have the right to nominate up to two-thirds of the total numbers of members ot the. committee of management.

The State Government passed the order on that basis that it had share capital of more than 60 per cent in the Federation. ll:

The Federation moved the Allahablad High Court against the said order of. the State Government. The High Court stayed the operation of the said order nominating two-thirds of the members of the committee of management. The High CoUtt dismissed the petition of the Federation on 8 December, 1970. On 18 December, 1970 the State Government cancelled the order dated 19 Septem- 1 ber, 1970.

The Additional Registrar, Co-operative Societies, Uttar Pradesh submitted an inspection report to the effect that the State Govtrnment had been misi)Jformed about the share capital of the Slate Government in the Federation. The report stated that in fabt the share capital of the State Government in the Federation G was never 60 per cent. The report further stated that the mMter should be thoronghly investigated and guilty persons should be punished.

The appellallt petitioner Veerpal Singh wrote a letter on 12 June, 1971 to the Chief Minister of Uttar Pradesh and asked for immediate acition pursuant to the report of the Additional Registrar ot Co-operative Societies. In that letter V eerpal Singh stated that Om Prakash Tyap, DOputy Registrar, Co-cperative Societies had

F ..

U.P. CO-OPERATWE FEDERATION V. U.P. STATE (Ray,].) 40S

been working as Secretary of the Federation Since 1970. Veerpal

Singh also !lated in the letter that on being elected Chairman he examined the accounts and found that Om Prakash Tyagi had been responsible for mal-practices.

On 26 June, 1971 the Stale Government passed the second orders under section 34 of the Act nominating two-thirds of the total number of members of the committee of management of the Federation. After the State Govent had passed the said order nominating two-thirds of the total number of members of the committee of management the elected members of the committee under rule 38 (b) of the by-laws of the Federation were moved by draw of lots to accommodate the nominated members. The appellant petitioner Veerpal Singh survived the process of draw by lots and retained his membership of the committee of management of the Federation.

In the Allahabad High Court the appellants challenged the first order of the State Government dated 19 September, 1970 on inter alia the ground thait the share holding of the State Government on facts and in law was not 60% and therefore the State

Government was not competent to pass an order under section 34 of the Act. The Allahabad High Court held that if the appellants . denied and disputed facts as to ownership biy the State Government of 60 per cent or more of the Capital of the Federation the High Court could not normally decide controverted facts and the petition would fail. The High CoUit however held that the State Government was justified in taking the view that the share holding had crossed the mark of 60 per cent and therefore the order was valid.

The petitioners in the writ petition challenged the second order dated 26 June, 1971 passed by the State Government under section

34 of the Act nominating two-thirds of the total number of members of the committee of management. The contentions are four.

Ft, that section 34 of the Act gives a naked power without any guidance as to when that power is to be exercised and under what

circumstance~. Secondly, it is said that the naked power under G section 34 infringes Article 14 of the Constitution by subjecting societies to directors of societies being picked and chosen by the G?verrunent without any principle being involved. Thirdly, it is said that the exercise of power was arbitrary and on extraneous grounds without any hearing being given. Fourthly the condition precedent of the, State Government holding 60 per 'cent of shares m the share capital of the Federation was not tulfllled.

It i~ not necessary to express any opinion . on the first three c0ntent1ons because in our OPinion the fourth contentiou 111cceeds:

The subscribed and paid up share capital of the federation on 30 June, 1969 was Rs. 34.04 lakhs.

Of this the State Government owned shares of the value of Rs. 20 Jakhs. The percentage of the State Government in the share holding was 58. 75 per cent.· The State Government case was that in January, 1970 the Federa- .ti001 terminated the membership of the co-operative banks.

The co-operative banks at that time held shares worth Rs. 53,000.

Subsequently, an individual co-operative society brought shares worth Rs. 1,000 in the Federation. Thus, the total paid up share Capital of the Federation came down to Rs. 33.52 lakhs, according to the version of 1the Government. The further Government case is that in the first week of September, 1970 the District Co-operative Federation, Saharanpur retired Rs. 50,000 out of its share capital ol Rs. 1,51,000 in the Federation. The result, according to the Government, was that the total paid up share capital of the Federation was further reduced to Rs. 33.01 lakhs. On this basis the State Government contended that the share capital of the State Government worth Rs. 20 lakhs was more than 60 per cent. The State Government on this footing of ownership of 60 per cent or more of the share caprtal of the Federation passed order under section 34 of the Act and nominated two-thirds of the total number of members of the committee of management of •the Federation.

The petitioners as well as the appellants on the other hand contended that neither the shares owned by the co-operative banks to the extent of Rs. 53,000 nor the shares worth Rs. 50,000 owned by the District Co-operative Federation. Saharanpur could be said

by the Government 'lo be reduced. from the total share capital to allow the State Government to take the plea that the State

Government owned 60 per cent' or more of the total share capital in the Federation. It is further contended by the petitioners as well as the appellants that on 26 June, 1971 the total share capital of the Federation was Rs. 40,17,000. According to them, this share capital included the share holdings of the co-operative banks at Rs. 53,000 and the further share holdings of Rs. 50,000 be- 1onging to the Saharanpur Federation. The petitioners therefore contended that the share capital of the State Government at Rs. 20 lakhs was not more than 49.81 per cent at the relevant date on 26 June, 1971.

Two .questions arise. First, whether it could be said that the share holding ol the co-operative banks at Rs. 53,000 was reduced from the share capital on the relevant dates in , September, 1970 or in the month of June, 1971. Second, whether the sum of

Rs. 50,000 out of share capital held by the District Co-operative H Federation, Saharanpur in .the share capital of the Federation had been retired with the resuk of reduction of the share capital of

the Federation.

A Under section 34 of the Act where the share capital subscribed by the State Government is 60 per cent or morll of the total share capital of a co-operative society the State Government shall have the right to nominate up to two-thirds of the total number of members of the committee of management.

Undr section 34 of the Act the State Government in such a cas~_has also the pawer to nominate a Government servant or a non-official as a Chairman B of the commitee. This power of nominating a Chairman i& notwithstanding the provisions contended in section 30 of the Act- Section 30 of the Act speaks of Chairman, Vice-Chairman of the society elected, nominated or appointed in accordance with the provisions of the Act, rules and -bye-laws.

Section 34 further provides that the State Government may exercise right mentioned C therein during the period oi five years from the time the share of the State Government in the share capital of the Federation becomes 60 per cent or more or until such share in the capital goes. down to less than 50 per cent whichever is earlier.

It may be noticed here that section 34 of the Act has been D amended by Uttar PradCl!h Act I of 1972. The rights of the parties in the present appeal as well as the petition are governed by section 34 of the Act as it stood prior to the amendment.

In view of the fact that the first order of the State Government dated 19 September, 1970 which was challenged in the Allahabad High Court was cancelled by the State Government ii! the month Of December, 1970 only the validity of the second order. dated'. 26 June, 1971 requires consideration.

The case of the Government is that under the Act a cooperative bank cannot be a member oi a co-operative society.

Prior to the Act co-operative banks could be share-holders of a co-operative society.

It is said on behalf of the Government that the Federation modified its bye-laws and made them consistent with the Act by deletfug the co-operative bank from the category of persons who could become members of the Federation.

On 30 June, 1970 it is said that Rs. 53,000 befug the share money of the co-operative bank was transferred from the share capital account into the suspense account in the books of the Federation.

Therefore, the case oi the Government is th'at the share capital of the Federation stood_ reduced by Rs. 53,000 on 30 June, 1970.

It appears that prior to the comfug into force of the Act the District Co-operative Banks were members of the Federation.

After the Act came into force the bye-laws of the Federation were

amended.

Under bye-law 5 of the Federation the membershipwas limited to two classes, viz., the District Co-operative Feation and the Marketing Societies.

The District Co-operative Banks therefore were not eligible to be members under the amended

bye-laws.

The question therefore arises as to what would happen to the shares of the cc>-operative banks who had become members prior to the coming into force of the Act.

Section 17 of the Act speaks of persons who may be members of a co-operative society.

Such persons are an individual, any other cc>-operative society, the State QQvemment, the Central Govermnent, the State Warehousing Corporation and a body corporate not covered by any other clause and approved by the Registrar. It is also enacted that a joint stock company or an individual shall not be admitted as an ordinary member. Seotion 22 of the Act contemplates restriCtions on individuals in regard to holding of shares. Section 23 of the Act speaks of restrictions on transfer of shares or of intere&t. Section 24 of the Act deals with transfer of interest on death of a member. Section 27 of the Act speaks of removal or expulsion of a member by the Registrar of the Society.

Rule 56 .of the Uttar Pradesh Co-operative Societies Rules, 1968 referred to as the Rules broadly deals with removal of members from membership of the society and expulsion of a member from the membership of the society. Rule 56(a)(i) states that a person may be removed from membership if he has ceased to fulfil the qualifications laid down under the Aot, rules and bye-laws of the society or (iv) his membership of the society is inconsistent with the provisions of rule 8 (b). Rule 57 states that a person sought to be removed or expelled under Rule 5 6 shall be called upon by the committee of management to show cause why he should not be removed or expelled. Rule 58 states that the committee of management may by a resolution p11$sed in the meeting remove or expel a memb:er, Rule 59 states that no resolution for removal or expulsion shall be effective unless it is carried by a majority of twc>-thirds of the members present and voting.

Rule 63 states that a member of the cc>-operative society shall cease to be a member inter alia on his removal or expulsion from society or retirement, transfer or forfeiture of all the shares held by him.

The provisions in the Act and the Rules iridicate that the removal can only be under a resolution. There is no provision for .automatic cessation of membership. In the absence of a resolution there is no valid removal of cc>-operative bank from membership.

In the case of removal of a member the shares of such a memb\er may under section 23 ( 3) of the Act be transferred to or acquired or retained by a member. Chapter VI ot the Rules con- 1isting of Rules 6S to 82 deals with shares. Rule 82 states that where member of a co-operative society ceases to be such a member th~ value ol his share or interest in the share capital of

the society to be p'aid ito him or his nominee shall be equal to the actual amount paid by the member to the society. These provisions indicate that there is no reduction of the share capital. There was no removal of co-operative banks from the membership of the Federation. There was no resolution to that effect. The shares owned by the co-operative banks are 1'till in existence.

These shares have not been yet transferred to tiny one. The shares have not been transferred to, acquired or retained by any person. The shares still stand in the name of the co-operative banks. The share capital is not reduced. It is therefore not valid on the part of pie State Government to reduce the shares worth Rs. 53,000 owned by the co-operative banks, and not to take the same into consideration in calculating the total share capital.

The other plea of the St11te Government is that shares worth Rs. 50,000 belonging to the Saharanpur District Co-operative Federation were retired with the result that there was reduction of total share capital by a sum of. Rs. 50,000. Retirement of shares is dealt w.ith by rule 66 of the Rules. It is stated in the rule that under section 23 ( 3) of the Act a co-operative society may retire the shares 'Of a member in the instances mentioned therein. The fourth instance in rule 66 is that if a member of a co-operative society has ceased to be a shareholder on account of adjustment of his membership to any other class under rule 44( c) or if he has been removed from membership under rule 56(a), his shares may be retired. Again under Rule 70 a Central Co-operative Society may reduce the share capital according to a scheme approved by the Registrar. Such a scheme may provide for (~) extinguishing or reducing the liability on any of its Ghares in respect of share capital not paid up, or (ii) cancelling any paid up share capital or (iii) paying back any paid up share capital which is in excess of the needs of the central society.

The Saharanpur District Co-opera1tive Federation never ceased to be a member.

There has been no removal or expulsion. If the Saharanpur District Co-operative Federation is still a member its share money cannot be taken out of share capital fund and treated as security money.

Retirement of sh.are money under G Rule 66 is in four cases. First, if a member at the time of his admission to memb!:rship enters into share participation agreement between the society and the membler his share may be retired,

Secondly, the shares of a member in a salary earning co-operative society in the event of. transfer of such member from the . area of operation of the society or cessat:on of his service by virtue of which he held membership of the society may be retired. Thirdly, H the shares of a member of a co-operative socJety organised in educational institutions if the member ceases to be a studet or a member of the sta!f of the institution by the virtue of which he

was holding membership of the society may be retired. None ol these three contingencies of retirement of shares applies to the case of the Saharanpur District Co-operative Federation. The fourth instance mentioned in rule 66 is the retirement of a member who has been removed from membership or has ceased to be a shareholder on account of adjustment of membership under rule 44( c) _ The District Co-operative Federation, Saharanpur does not fall in thi>. class also.

The amount of Rs. 50,000 representing the shares of the District Co-operative Federation, Saharanpur was said by the State Government to be kept in security. If the shares were in security the shares remained in specie. It could not be said that the shares were :onverted by sale into money. Rule 75 forbids by pothecation of shares as security for any loan. It is therefore not open to the State Government to contend that the shares worth Rs. 50,000 belonging to the District Co-operative Federation, Saharanpu'r were taken off the share capital of the Federation.

The condition precedent to the exercise of rights_ of the State Government under section 34 is that the State Government owns 60 per cent or more of the share capital of the Federation. The entire basis of exercise of right of the Government was that shares worth Rs. 53,000 owned by the Co-operative anks and shares worth Rs. 50,000 owned by the District Co-operative Federation, Saharanpur were no longer part of the share capital. There is no foundation for the State Government to take up that plea. The shares in both the cases are still part of the share capital. The result is that it could not be said tht the State Government was justllied to exercise right under section 34 of the Act.

For the foregoing reasons the petition succeeds. The order of the State Government dated 26 June, 1971 is quashed.

The appeal is also allowed and the judgment of the High Court is set aside for the reasons indicated hereinbefore.

Each party will pay and bear its own costs.

S.B.W.

Appeal allowed.

UTIAR PRADESH CO-OPERATIVE FEDERATION

THE STATE OF U.P. & ORS

S. M. SIKRI, C.J.

N. RAY

D. G. PALEKAR

M. H. BEG

S. N. DWIVEDI, JJ

Cooperative Societies Act, 1965

Cooperative Societies Rules 1968

section 34

Cooperative Societies Act

Slate Government

Saharanpur

s. 34

Sec. 34

Saharanpur District

section 34

Article 32

Constitution of India

A. K. Sen

A. P. Singh Chauhan

V. C. Prashar

Dluiram Pal Singh Chauhan

C. K. Daphtary

B. Sen

P. Rana

RAY

section 34

Veerpal Singh

Uttar Pradesh State Government

26 June, 1971

section 34

section 34

30th March 1970

8 April 1970

September, 1970

section 34

section 34

Allahablad High Court

8 December, 1970

18 December, 1970

19 Septem- 1 ber, 1970

Uttar Pradesh

12 June, 1971

V eerpal Singh

Om Prakash Tyap

Veerpal

Singh

Om Prakash Tyagi

section 34

Allahabad High Court

19 September, 1970

section 34

section

34

section 34

section 34

Article 14

30 June, 1969

section 34

Saharanpur Federation

section 34

section 34

section 30

Section 30

Section 34

section 34

section 34

Allahabad

30 June, 1970

Section 17

Section 23

Section 24

Section 27

section 23

Chapter VI ot the Rules

section 23

Central Co-operative Society

section 34

section 34


KAILASH RAl v.

JAi JAi R.AM & OTHERS

January 22, 1973

(I. D. DUA AND C. A. VAIDIAL!NGAM, JJ.]

4 11

!J.P. Zamindari A.bolitio11 and Land Reforms A.ct, 1950, s. 18(1)- (a)-'PosseS<ion', 'held', 'deemed to be held', meaning of.

The appellant filed a suit against the respondents for his share in certain property and the decree in the suit recognised his right as a cosharer along with the respondents. After the

U. P.

Zamindari Abolition and Land Reforms Act, 1950, came 'into force the appellant filed a suit for division of the holdings on the ground that all the plots were joint bhumidhari and that his share should be separated.

The resJ><1Ddents contested the claim on the ground that they alone had bhumidbari rights in the properti.S. The trial court dismissed the suit.

The first appellate court upheld the appellant's claim under s.18(1) (a) of the Act and decreed the suit. In second appeal, the High Court called for a finding from the first appellate court and the first. appellate court submitted its finding that the respondents were in exclusive possession of the khudkasht and sir plots in dispute. Accepthng the finding, the High Court allowed the appeal and dismissed the suit.

Allowing the appeal to this Court, HELD: (I) Under s. lS(l)(a) all lands in possession of, or held, or deemed to be held by an intermediary as sir, khudkasht or en intermediary's grove on 30th June, 1952, shall he deemed to be settled by the State Gove\tmnent with such intermediary. Tho said intermediary is entitled to take or retain possession as bhumidhar.

In order to claim the rights under the clause it is necessary th1lt the lands should be (a) in possessi'on of an intermediary as K.hudkasht or sir, or (b) held by an intermediary as khudkasht or sir, or (c) deemed to be held by an intermediary as Khuclkasht or sir. Khudkasht means land other than sir cultivated by a Iandlprd either by himself or by servants or by hired labour. [4150-f]

(2) In law, the possession of one co-sharer is possession botb on his behalf as well as on behalf of all the other oosharers, unless ouster is pleaded and established. In this case, the finding is that the respondents had not raised the plea of ouster, and there is IJlO indication in the Act or the U.P. Tenancy Act, 1939, that bhumidhari rights are not intended to be conferred on all the co-•harers or co-proprietors who are entitled to the prorties, though only some of them may be in actual cultivation. [416A-C]

( 3) Even when one cc>-sharer is in possession of the land the other co-s}Jarers must be considered to b.e in CQMtructive possession of the land. The expression 'possession' in s.18(1)(a) takes in not only actual physical possession but also constructive possession that a person has in law.

[416CE]

(4) Section lS(l)(a) takes in two other contingencies, namely, lands held as khudkasbt or lands deemed to be beld as khudkasht. Enn assuming that in view of the finding submitted by the first appellate court that the respondents were in possession, and on that basis, the appellant could not be considered to be also in possession nevertheleSI tho lands and could be considered to be held or deemed to be held by th~ appellant also. If the expression 'held' occurring in

cl. (a) means 11-4.796Sup.C.l./73

actual possession then the same mcairring must be given to the same word occurring in (b) also. But, in the latter part of cl. (b) the Legislature has used the exprcssiun 'personal cultivation' with reference to Avadh, whereas it has not used any such cxprenion in the first part of cl. (b). Therefore, the expression 'held' must have a meaning different from' pcrsoinat cultivation;' and can only taken to .connote the existence of a right or title in a person~ and the appellant's right and title as holder of the lands had already been declared. It can also b.e held that the lands can be considered to be 'deemed to be held'. by the appellant.

The expression 'deemed to be held' has been used by the Legislature to treat persons like the appellaint bhumldhars by creating a fiction. [417A-DJ

Budhan Singh & A"' v. Nabi Bux & f!nr., [1970] 2 S.C.R. 10 followed.

Rania Kant Singh and others v. Deputy Director of Consolidation and others, A. I. R. 1966 All. 172 over ruled.

(5) It was not necessary for the appellant to file an appeal against the order of the High Court calling for a. finding from the first appellate court. That order was passed at an intermediary stage and the appellant was justified In waiting for the final decision of the High Court.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1229 of 1967.

Appeal by a special leave from the judgment and order dated September 19, 1966 of the Allahabad High Court in Second Appeal No. 397 of 1966.

I. P. Goyal and G. S. Chatter; ee, for llhe appellant.

S. K. Bagga, S. Bagga and M. Veerappa, for respondent No. 3.

The Judgment of the Court was delivered by.

VAIDIALINOAM, J. The question that arises for consideration in this appeal, by special leave, relates to the proper interpretation to be placed on section 18, sub-section 1, clause (a) of the U.P.

Zamindari Abolition and Land Reforms Act, 1950 (U.P. Act No. 1 of 1951) hereinafter referred to as the Abolition Act.

In order to appreciate the claim of the plaintiff based upon the proVision quoted above, it is necessary to set out the pedigree which is as follows :-

I Ram Prasad

Chirlut

I Gan pat

(Dofd1sR'5pl)

Baijnath

. I B1shnudat

I Balkaran

Ramldhare

- Mst. Pharamdei

M I . st. R1mrat1

KaiJJah rPlfrApplt.)

I Hanuman

Chulai -Msr. Retraji

I Manudat

C I . ann

I I Patesharl Ja1ja Ran1 (Defdts-Re•Pdts )

It will be noted from the above pedigree that the plaintiff in the son of Ms. Ramrati and the grandson of Ram Adhare. After the death of Ram Adhare, the defendents-respondents got their names rocorded over the properties on the allegation that Ram Adhare was a member of a joint family with them. Mst. Ramrati, mother of the appellant, filed suit No. 918 of 1945 in the court of Civil Judge for a declaration that she was entitled to the prope1; ty inherited from her father, Ram Adharc.

Relief for possession of the properties was also claimed.

As she died during the pendency of the suit, the appellant before us, Kailash Rai, got himself substituted as heirson of Ramrati. On May 16, 194 7, the Additional Civil Judge decreed the appellant's claim. On June 13, 1947, the plaintiff obtained dakhaldahani through court. The respondents, who are defendants in the said suit, filed an appeal in the High Court which was dismissed on March 18, 1952.

On July l, 1952, the Abolition Act came into force.

The appellant filed suit No. 1132 of 1953 in the court of the Munsif.

Gorakhpur for the division of the holdings on the ground that all the plots were joint bhumidhari and that his one-fourth share should be separated. The defendants contested the claim on the ground that they alone have got bhumidhari rights in the pro- -perties and the plaintiff has no right, title or interest. The learned

Munsif accepting the defence dismissed the suit.

On appeal by Kailash Rai, the learned District Judge of Gorakhpur upheld his claim under section 18(1) (a) and decreed his suit, thus reversing the judgment of the trial court. The defendants carried the matter in Second Appeal No. 397 of 1956 to the Allahbad High Court.

In the first instance, the High Court by its order dated July 27, 1965, called for a finding from the District Court on the following question:- ''Whether the defendant-appellant were in exclusive possession of the khudkasht and sir plots in dispute and if so, since when ?"

The District Court submitted i•q finding to the effect that the defendants were in exclusive possession of the khudkasht and sir

plot~ in dispute since 1947. The High Court accepted the finding; and by its judgment and order dated September 19, 1966, allowed the defendants' appeal and dismissed the plaintiff's suit on the ground that he was not in cultivatory possession of the plots in dispute.

This appeal is against the said judgment of the High Court.

The contention of Mr. J. P. Goyal, learned counsel for the appellant, is that as the plaintiff and the defendants were admittedly co-sharers and the appellant's right, title and interest have been declared in suit No. 918 of 1945, the possession by the defendants, who are some of the co-sharers, is, in the eye of law, possession for and on behalf of the appellant also. If so, the appellant is a person, who is in possession of the lands as khudkasht. In any event, the Jands must be considered to be held or deemed to be held' by the appellant as khudkasht so as to attract section 18 ( 1 ) -

(a) of the Abolition Act. His further contention is that suit No. 1132 of 1953 out of which these proceedings arise, is really a suit under section 176 of the Abolition Act for partition of the bhumidhari rights 1as between the co-sharers.

Mr. S. K. Bagga, learned counsel for the defendants, urged that the appellant should have really filed an appeal against the order of the High Court dated July 27, 1965, in and by which .it called for a finding regarding the possession of the properties. Not hav·

ing challenged that order, the counsel ursed, it is longer open to the appellant to challenge the final order of the High Court accepting the finding submitted by the District Court. The counsel further contended that the decision of the High Court is in accordance with the view held in a previous decision reported in Rama Kant Singh and others v. Deputy Director of Consolidation and

others('). When Uie defendants have been found to be in cultivatory possession of the. properties, the view of the High Court negativing the appellant"s claim is, according to Mr. Bagga, fully justified.

This will be the convenient stage to. refer to the material provisions of the Abolition Act. Section 3 defines the various expressions. In clause 26, it is provided that certain other eitpressions

referred to therein, including khudkasht and sir, shall have the meaning assigned to them in the United Provinces Tenancy Act, 1939 (hereinafter referred to as the Tenancy Act). Section 3(9) of the Tenancy Act defines khudkasht as "land other than sir culti- •akd by a landlard, and under-proprietor or a permanent tenureholder as 1>UCh either himself or by servants or by hired labour".

Sir is defined in section 6 occurring in chapter II of the Tenancy Act. Section 4 of the Abolition Act provides for vesting of estates from a date to be specified by notification. Section 18 ( 1) of the Abolition Act, which is relevant for our purpose, runs as follows:-

"18. Settlement of certain lands with intermediaries or cultivators as bhumidhars-(1) $Ubject to the provisions of sections 10, 15, 16 and 17, all lands-

(a) in possession of or held or deemed to be held by an intermediary as sir, khudkasht or an intermediary's grove,

(b) held as a grove by, or in the personal cultivation of a permanent lessee in Avadh, -~~~~~~--:

(!) A.I.R. 1966 All. 173

KAlLASH RA! v. JAi RAM (Vaidialing(lnl, l.) 415

( c) held by a fixed-rate tenant or a rentfree grantee as such, or ( d) held as such by-

(; J an occupany tenant, 1 Possessing the right to QU a hereditary tenant, . . l transfer the holding bi tin) atenantonJ'attadawam1 or1stam f sale. rarireferrc toinsection 17.

( e) held by a grove-holder,

, on the date immediately preceding t!ie date of vesting shall be deemed to be settled by the State Government with such intermediary, lessee, tenant, grantee or groveholder, as the case may be, who shall, subject to the provisions of this Act, be entitled to take or retain possession as bhumidhar thereof."

• • * • * ,._

There is no controversy that the date of vesting is 1-7-1952 and the date immediately preceding the date of vesting is 30-6--

1952. Under section 18(l)(a), broadly speaking, it will be seen, all lands in possession of, or held, or deemed to be held by an intermediary as sir, khudkasht or an intermediary's grove on 30-6-

1952, shall be deemed to be settled by the State Government with such intermediary. The said intermediary is entitled to take or retain possession as bhumidar subjei:t to the provisions of the Abolition Act. In order to claim rights under clause (a), it is nece!isary that the lands should be (1 ) in possession of an intermediary as khudkanst or sir or ( 2) held by an intermediary as khudkasht or sir or ( 3) deemed to be held by an intermediary as :l::hudkasht or sir. If any one of these alternatives is established, clause (a J, will stand attracted. Khudkasht, as We have already pointed out, means land, other than sir cultivated a landlord 'either by himself or by servants or by hired Jabour.

The question is whether the appellant can be considered to be in "possession" of the lands as khudkasht or whether it can be considered that the lands are "held or deemed to be held by him" as khudkasht. The finding sent by the District Court is no doubt prima-facie against the appellant. But we cannot ignore the decree that has been obtained by him in suit No. 918 of 1945 and the further fact that he is working out the said decree by asking for partition in the present proceedings. According to the High ourt, as possession is with the defendants, the plaintiff-appellant cannot get any relief.

It should be remembered that the District Court has recorded a definite finding that the defendants have not set up any plea of ouster. This finding, so far as we would see, has not been disturbed by the High Court. The decree in suit No. 918 of 1045 clearly

SUPREME COURT REPORTS (1973] 3 s.c.It.

recognises the right of the appellant as a co-sharer along with the defendants. In law the possession of one co-sharer is posession both on his behalf as well as on behalf of all the other co-sharers.. unless ouster is pleaded and established. In this case, as pointed! out by us earlier, the finding is that the defendants have not raised'. the plea of ouster. There is no indication in the Abolition Act or the Tenancy Act that bhumidari rights are not intended to be conferred on all the co-sharers or co-proprietors, who are entitled to the properties, though only some of them may be in actual cultivation. One can very we!l visualise a family consisting of father and two sons, both of whom are minors. Normally, the cultivation will be done only by the father. Does it mean that when the father is found to be cultivating the land on 30-6-1952, he alone

i~ entitled to the bhumidhari rights in the land and that his two minor sons are not entitled to any such rights ? In our opinion. the normal principal that possession by one co-sharer is possession for all has to be applied. Further, even when one co-sharer is in possession of the land, the other co-sharers must be considered to be in constructive possession of the land. The expression 'possession' in clause (a), in our opinion, takes in not only actual physical possession, but also constructive possession that a person has in law. If so, when the defendants were in possession of t11e lands and when no plea of ouster had been raised or established, such posses&on is also on behalf of the plaintiff-appellant. Under such c$'c11m.stances, the lands can be considered to be the possession of the appellant or, at any rate, in his constructive possession.

Clause (a), as we have pointed out, takes in two other contigencies also, namely, lands held as khudkasht or lands deemed to be held as khndkasht. Evea assuming that, in view of the finding of the District Court, the defendants are in possession and on that

'basis the plaintiff cannot be considered to be also in possession, nevertheless, tlie lands in question can be considered to be held or deemed to be held by the appellant also. The expression 'held' occurs in section 9 of ilie Abolition Act. In interpreting the said expression, this court in Budhan Singh & Anr. v. Nabi "Bux & A nr. (1 ) has held tliat it means 'lawfully held'.

This court has further observed that- ·

"According to Webster's New Twentieth Century l[)ictionary tl!e word 'held' is technically understood to mean to possess by lep; al title. Therefore by interpreting the word 'held' as 'lawfully held' tliere was no addition of any word to tlie section. According to tlie words of s. 9 and in tl!e context of ilie scheme of the Act it is proocr to construe tl!e word 'held' in the section as !lawfully held'."

Mr. Bagga, however, contended that the expression 'held' in clause (a) denotes actual possession. As the fincling on that point is against. the appellant, the lands cannot be considered to be 'held' by him. We are not inclined to accept this contention. In clause ( b) occurs tho words 'held' as a grow by'. If the expression 'held' occuring in clause (a) means actual possession, then the same meaning must be given to the same word occurring in clause (b) also. But it will be seen that in the latter part of clause (b), the leplature has used the expression 'personal cultivation' with reference to A vadh, whereas it has not used any such expression in tho first part of clause (b). Therefore, the expression 'held' must have a meaning different from personal cultivation. In our opinion, the expression 'held' can only be taken to connote the existence of a right or title in a person. The appellant's right and title as holder of tlie lands has been declared and settled in suit No. 918 of 1945.

It can also be held that the lands can be considered to be 'deemed to be held' by the appellant. The expression 'deemed to be beid' has been used by the legislature to treat persons like tho appellant bhumidhars by creating a fiction.

We cannot accept the contention of Mr. Bagga that tho appellant should have challenged the order of the High Court dated July 27, 1965, calling for a finding from the first appellants court. That order was passed at an intermediary stage and the. appellant was justified in waiting for the final decision of the High Court to be i:iven. It is now necessary to consider tho decision of the Allahabad High CoUrt in Rama Kant Singh and other.s v. Deputy Director of Consolidation and others(') following which the present decision under appeal has been rendered. It is no doubt true that the aid decision does support the respondents in the sense that it holds that only that co-proprietor who is in cultivatory possession, becomes

k.hudkasht holder and that possession over proprietary rights by il.!elf does not confer khudkasht flolder's rights. The said decision, we find, has laid undue emphasis on cultivatory possession, which

alone will attract clause (a) of section 18(1). There is no .:onsidcration in the said decision of the various aspects referred to by us and we are not inclined to agree with the view taken by the High Court in the said decision.

In the result, the judgment and order of the High Court under appeal are st as!d? and the decision of . the District Judge, Gorakhpur, m Civil Appeal No. 494 of 1955 will stand restored.

There will be no order as to c_osts in this appeal.

V.P.S.

(I) A.l.R. 1966 All. 172.

KAILASH RAl

JAi JAi R.AM & OTHERS

January 22, 1973

I. D. DUA

s. 18(1)

30th June, 1952

Tenancy Act, 1939

Avadh

[1970] 2 S.C.R. 10

Allahabad High Court

I. P. Goyal

G. S. Chatter

S. K. Bagga

S. Bagga

M. Veerappa

VAIDIALINOAM

section 18

section 1

Ram Prasad

Chirlut

Hanuman

Chulai

Ramrati

Ram Adharc

Kailash Rai

May 16, 194 7

June 13, 1947

March 18, 1952

July l, 1952

Kailash Rai

District Judge of Gorakhpur

section 18(1)

Allahbad High Court

July 27, 1965

September 19, 1966

J. P. Goyal

section 18

section 176

S. K. Bagga

Bagga

Section 3

clause 26

United Provinces Tenancy Act, 1939

Section 3(9)

section 6

II of the Tenancy Act

Section 4

Section 18

sections 10, 15, 16 and 17

section 17

section 18(l)(a)

30-6-

1952

SUPREME COURT REPORTS (1973] 3 s.c

section 9

s. 9

Allahabad High CoUrt

section 18(1)

District Judge, Gorakhpur


VBERPAL SINGH v.

REGISTRAR, COOPERATIVE SOCIETIES, U.P. & ORS.

January 22, 1973

[S. M. S!KRI, C. J., A. N. RAY, D. G. PALEK.AR, M. H. BEG AND

S. N. DWIVEDI, JJ.] Cooperative Societies Act s. JS-Registrar's powers in regard to suspension of President and Committees of management of Cooperative Society and appointment of administration-Conditions for exercise of power undo s. 35(2).

The Deputy Registrar Cooperative Societies, Meerut, by order dated 14 July, 1971 suspended the President and the Commit~ of manage ment of Jahangirabad Cooperative Marketing Society Ltd., and further appo'JIQ!ed an administrator to carry on the functions of. the society.

A writ petition was filed by Y and others in the High Court of Allahabad under Art. 226 of the Constitution challenging the aforesaid order of the Deputy Registrar. The petition was dismissed, whereupon an appeel was filed in this Court by special leave. V, who was the President of the J ahangirabad Cooperative Marketing Society also filed a writ petition ilJl this Court challenging the Deputy Registrar's order dated 14 July, 1971. The questions that fell for consideration in the appeal and writ petition were : ( 1) wbJlther the Deputy Registrar's order suspending the President and committee of management of the Society was valid;

(ii) whether the Deputy Registrar could temporarily appoint an administrator.

HELD : (i) The provisiOlllS in s. 35 (I) of the Cooperative Societies Act, 1965 indicate the circumstances under which the Registrar has power to supersede or suspend the committee of managenient and to appoint an administrator. Section 35(2) of the Act confer~ power on the Registrar to suspend the committee of management duri:ng the period of proceedings for supersession. The Registrar has also power under section 35(2) of the Act to make arrangement as he thinks proper for the management of the society till the proceedings are completed. The power to suspend the committee of managememt during the period Of proceedings is exefcisable when proceedin~ for supersession have commenced. Section 35(1) of the Act shows that when the Registrar is of opinion that the committee of a Cooperative Society makes default or is negligent in the performance of duties or is otherwise •ot functioning properly the Registrar may supersede the committee ot management and has to give an opportunity to the society to be ard in that behalf. The Registrar bas also to obtain the opinion of the general body of the society. Therefore the opinion of the Registrar is to be followed by some definite act which will <'ommence the proceedings for supersess1QD.

The provisions in the Act indicate that

som~ definite step like the issue of notice must be taken under the provisions of section 35(!) of the Act with a view to show that proceedings for supersesSion of the committee are set in motion. [422A-EJ It is therefore manifest that power exercisable under s. 35(2) ot the Act is confined to the time during the period of susp<1DSion proc.eedings.

Unless the proceedings have started as indicated earlier the Registrar cannot call in aid the power exertjsable under s. 35(2) of the Act.

(422&.FJ

(ii) As no prjlOOCdings had bee!' set in motin in acoordOl!lCe ith the pro'iisions of the statnte, the interim suspens10!1. of the cottee of management was bad. As appointment of administrator during the interim period is not ruled out of the provisions of s. 35(2) of the Act, but the prerequisite condition to t)le appointment of the interim administrator ood not been fulfilled in the present case, because no proceeding for the supersession of the committee of management of the society had commenoed. [4220-H; 423A-BJ

(iii) The administrator appoiinted by the Registrar withdrew t!ie delegation of the petitioner appellant V to the Uttar Pradesh Provincial Cooperative Federation. Since the appointment of the administrator was bad the withdrawal of the delegation of V by the administrator was also bad. [423C.D]

Accordingly the writ petition and the appeal must be a!lQwed and the order of the Deputy Registmr dated 14 July, 1971 must be quashed. -

[423DJ

ORIGINAL/CJVIL APPELLATE JURISDICTION : Writ Petition No. 298 of 1971.

Petition under Article 32 of the Constitution of India for the enforcement of fundamental rights and Civil Appeal No. 593 of D 1972.

Appeal by a special leave from the judgment and order dated November 24, 1971 of <the High Court of Allahabad in W.P. No. 6667 /71.

A.K. Sen, A. P. Singh Chauhan, V. C. Prashar and Dharmpal Singh Chauhan, for the petitioner and appellant.

C. K. Daphtary, B. Sen and 0. P. Rana, for the respondents Nos. 1-3 (in writ petition and Appeals).

The Judgment of the Court was delibered by

RAY, J. The petitioner in this writ petition impeaches the order dated 14 July, 1971 passed by the Deputy Registrar, Cooperative Societies, Meerut, By that order the Deputy Registrar, Cooperative Societies suspended the President and the committee of management of J ahangirabad Cooperative Marketing Society Ltd., J ahangirabad. The petitioner V eerpal Singh was the President of the Jahangirabad Cooperative Marketing Society. By that order the Deputy Registrar further appointed Ghanshyam Murari Sharma, Additional District Cooperative Officer, Bulandshahr as Administrator ro carry on the functions of the society.

The appeal is from the order dated 29 November, 1971 of the Allahabad High Court dismissing in limine the petition under Article 226 of the Constitution. In that petition the appellant Yograj Singh and others challenged the aforesaid order dated 14 July, 1971 suspending the President and the committee of management of Jahangirabad Cooperative Marketing Society.

Two questions fall for determination in the writ petltion and the appeal. First, whether the Deputy Registrar under the Cooperative

Societies Act, 1965 referred to as the Act could suspend the President and the committee of management of J ahangirabad Cooperative Marketing Society. Secondly, whether the Deputy Registrar could temporarily appoint an administrator.

Counsel on behalf of the petitioner raised three contentions for impeaching the order of suspension. First, it was said that the order of suspension is void because it is made malafiide and exercised for the collateral purpose of withdrawing the petitioner from the committee of management to which he was elected and in which he continued his office. Secondly, it was said that the order of suspension is bad because there were no supersession proceedings as contemplated in section 35 of the Act. The Registrar did not give an opportunity to the Society and did not hear the Society. The Registrar did not obtain the opinion of the general body of the society as to the suspension of the committee. Thirdly, it was said that !lie suspension order could not have the effect of appointment of an administrator under section 35 of the Act.

In the month of April 1969 there was an inspection of the J ahangirabad Cooperative Marketing Society (hereinafter referred to as the Society). That inspection note has, however, not been disclosed. In the month of October, 1969 the petitioner was reelected as a Director of the management of the society. Again, in the month of October, 1969 the petitioner was appointed as a delegate by the committee of management of the Society to the Provincial Cooperative Federation. Subsequently, the general body of the Provincial Cooperative Federation elected the petitioner to the committee of management of the Federation. In the month of April

1970, the petitioner was also elected Chairman of the Provincial Cooperative Federation.

In the month of Se_ptember, 1970 at the instance and under the direction of the Deputy Registrar who had been a former Secretary of the Federation and of1Shri Yadav_ the then Minister of Cooperative Society, the Uttar Pradesh Government nominated 10 members and a Chairman of the Federation. The petitioner who was the then Chairman, was however omitted from the list of the U.P.

Government. In the month of December, 1970 the new Ministry of the U.P. Government revoked the previous order of Government made in !he m_onth of September, 1970.

In the month of June, 1971 there was again a new Ministry in which Shri Yadav again became the Minister of Cooperative Society. The Government then nominated 10 members in the committee of management of the Federation under section 34(1 ) of Act and appointed the Additional Registrar of Cooperative Society as the President.

' _., •

~ \

• ;

A In the month of June, 1971 a lot was drawn to find out which of the Directors of the Provincial Cooperative Federation were to vacate the office in order to make room for the nominees of the Government. The petitioner survived his office in the lot.

The petitioner made an application for amendmen~ of. the petition. In that application for amendment, allegations were made that Shri Y adav and Tyagi both contrived to suspend the committee of management of the Federation. It was also alleged that the withdrawal of the deJegation of the petitioner to the Provincial Cooperative Federation was ante dated. The order of withdrawal . was dated 15 July, 1971. The letter dated 15 July; 1971 is said to have been sent by the administrator of the Society withdrawing the delegation of thpetitioner to the U.P. Provincial Cooperative Federation. The petitioner denies that alleged fact. In the prayer of the petition for amendment the petitioner asked for quashing the order dated 15 July, 1971. ·

In view of the fact that the petitioner did not allege facts ta raise any plea of malafide acts on the part of the respondents this Court did not allow any amendment of the peti(ion. The power of suspension of the committee of management is. to be found in section 35(2) of the Act.

Section 35 (2) of the Act is as follows

"Where the Registrar, while proceeding to take action under sub-section (1) is of opinion that suspension of the committee of management during the period of proceedings is necessary in the interest of the society, he may suspend the committee of management which shall thereupon cease ta function, and make such arrangement as '1e thinks proper for the management of the affairs of the society till the proceedings are completed.: , Provided that if the committee of management sa suspended is not Sl!l'erseded it shall be reinstated and the . period during which it has remained suspended shall count towards its term".

The Registrar has power under section 35(1) of the Act to supersede the committee of management. The circumstances under which he can exercise his powers are when in the opinion of the Registrar the society makes default or is negligen~ in the performance of duties imposed on it by the Act or t; he rules or the bye-laws of the society or commits any act which is prejudicial to the interest of the society or its members, or is otherwise not functioning properly, the Registrar after affording the committee of anagement a reasonable opportunity of being heard and obtaining the opinion of the general body of the society in a general meeting called for the purpose in the manner prescribed may, by order in writing, supersede the committee of management.

These provisions indicate the circumstances under which the .Registrar has power to supersede or suspend the committee of management and to appoint an administrator. Section 35(2) of the Act confers power on the Registrar to suspend the committee of management during the period of proceedings for supersession. The Registrar has also power under section 35(2) of the Act to make arrangemeno as he thinks proper for the management of the society till the proceedings are completed. The power to suspend the committee of management during the period of proceedings is exercisable when proceedings for supersession have commenced. Section 35(1) of the Act shows that when the Registrar is of opinion that the commiHee of a cooperative society makes default or is negligent in the performance of duties or is otherwise not functioning properly the Registrar may supersede the committee of management and has to give an opportunity to the society to be heard in that behalf. The Registrar has also to obtain the opinion of !)le general body of the society. Therefore, the opinion of the Registrar is to be followed by some definite act which will commence the proceedings for supersession. The provisions in the Act indicate that some definite step like the issue of a notice must be taken under the provisions of section 35(1) of the Act with a view to show that proceedings for supersession of !he committee are set in motion.

It is therefore manifest that power exercisable under section 35 (2) of the Act is confined to the time during the period of supersession proceedings. Unless the proceedings have started as indicated earlier !he Registrar cannot call in aid the power exercisable under section 35 (2) of the Act.

The second question which has to be decided is whether. the Registrar could appoint an administrator in the present case. The Registrar could not appoint an administrator. The reasons are these. The proceedings for supersession of the committee of managementi have not commenced. The proceedings can commence only when the necessary step to commence it is taken. The interim suspension of the committee of management under section 35(2) of the Act is when when in the opinion of the Registrar the suspension of the committee of management during the period of proceedings is necessary in the interest of the society. As no proceedings have been set in motion in accordance with the pro, visions of the statute, the interim suspension of the committee of management is bad. An appointment of administrator is specifically dealt with in sui>sectlons 3, 4, 5 and 6 of section 35 of the Act. The appointment of administrator is normally after the

persession of the committee of management. It is true that there 1s no specific provision for an appoin!ment of administrator during

the interim period. But section 35(2) of the Act st.ates that the- Registrar may make such arrangement as he thinks proper for the management of the affilis of the society till the proceedings arecompleted. An appointment of administrator during the intmm period is therefore not ruled out of the provisions of section 35(2) of the Act, but tlle prerequisite condition to the appointment of the interim administrator has not been fulfilled in the present case, because no proceedings for the supersession of the committee of management of the socie-ty have commenced.

The administrator appointed by tlle Registrar withdrew the delegation of the petitioner appellant Veerpal Singh to the Uttar Pradesh Provincial Cooperative Federation. Under Rule 86 of the Uttar Pradesh Cooperative Societies Rules 1968 a person who is a delegate of a cooperative society shall cease to be such delegate if he is withdrawn by the committee, administrator or administrators appointed by the Registrar under section 35 of the Act.. In the present case the appointment of tlle administrator is bad as indicated earlier. The act of the Registrar in withdrawing the delegation of Veerpal Singh is also bad because of his infirmity to act as an administrator.

For these reasons, the order dated 14 July, 1971 is set aside and quashed. The petition succeeds. The appar is also allowed.

Parties will pay and bear their own costs.

G.C.

Appeal allowed.

VBERPAL SINGH

REGISTRAR, COOPERATIVE SOCIETIES, U.P.

January 22, 1973

A. N. RAY

M. H. BEG

S. N. DWIVEDI, JJ.

Cooperative Societies Act

s. 35(2)

High Court of Allahabad

Art. 226

14 July, 1971

s. 35

Cooperative Societies Act, 1965

Section 35(2)

section 35(2)

Section 35(1)

section 35(!)

s. 35(2)

s. 35(2)

s. 35(2)

Article 32

Constitution of India

A.K. Sen

A. P. Singh Chauhan

V. C. Prashar

Dharmpal Singh Chauhan

C. K. Daphtary

B. Sen

0. P. Rana

RAY

V eerpal Singh

Ghanshyam Murari Sharma

Bulandshahr

Article 226

Yograj Singh

Societies Act, 1965

section 35

section 35

Provincial Cooperative Federation

Yadav

In the month of September, 1970 at the instance and under the direction of the Deputy Registrar who had been a former Secretary of the Federation and of1Shri Yadav the then Minister of Cooperative Society, the Uttar Pradesh Government nominated 10 members and a Chairman of the Federation.

Uttar Pradesh Government

U.P.

Government

U.P. Government

section 34(1 )

Y adav

Tyagi

U.P. Provincial Cooperative Federation

15 July, 1971

section 35(2)

Section 35

section 35(1)

Section 35(2)

section 35(2)

Section 35(1)

section 35(1)

section 35

section 35

section 35(2)

section 35

section 35(2)

section 35(2)

Veerpal Singh

section 35

Veerpal Singh


M/S. KANPUR VANASPATI STORES, KANPUR

THE COMMISSIONER OF SALES TAX, U.P. LUCKNOW

January 22, 1973

[K. S. HEGDE, P. JAGANMOHAN REDDY AND H. R. KHANN,\ J.J.] B

U.P. Salts Tax Act, Sec. 3A : (•successivt Dealer". whether includes an importer who is the first cleal". U, f. Scles Tc~• Act, Sec. 9(1) proviso; "tax adn1itted"-Whether restricted to ad1nission in 111e111oran dum of apptal only.

The assessee, among other things, imports and distributes vanaspati as agent of certain compa:nies..

For the year 1957-58, he filed a return on a turn over of Rs. 1,66,387.3 P and paid tax of Rs. 1060.30.

Before the assessing authority, he accepted the liability of Rs. 10,331H9 p.

On independent enquiries, the Sales Tax Officer came to the conclusion that the turn over was Rs. 58,06,132.31) and the tax liability was to the extent of Rs. 3,62,691. 62P. The tax authority had to resort to best assessment, as the assessce failed to appear, although 30 adjour.nments were given. The assessee filed an appeal to the appellate authority without depositing the tax, as required by proviso to Sec. 9 of the Act.

The appeal was dismissed for noncompli®ce of Sec. 9.

At the inst an~ .of the assessee, the question of maintainability of 'IJ'peal was referred to the High Court. During the pendency of the reference, the asses., e filed wnt petitions challeinging the validity of the Notification issued under section 3A and the legality of the proceedings. The High Court htld that the appeal was properly dismissed. Before this Court. the following questions were raised : (i) that the assessee-appellant being an importer cannot be considered as one of the successive dealers in the series of sales as contemplated by Section 3A aind, therefore, the Notification under section 3(A) was ultra vires, and (ii) that the dismissal of appeal, for want of payment of the admitted tax under section 9( I) , of the Act was illegaL

Dismissing the appeal, HELD : (i) An importer is one of the dealers.

He is the first deal.er in the State.

Chain of successive dealers begins from the first dealer and it goes to the 1ast dealer.

In view of this, dealer in this chaiu can be considered as a "suc'cessive dealer".

The series does not begin in the middle. The notification undelr section 3 is a valid notification Ram Ku1nar Rajendra Swaroop Vs. Co111111issjoner of Sr.fes Tax (19 S.T.C. 241) approved. [4266 C-DJ

(ii) Th.e assessee had accepted the liability of Rs. 10,339/- before the tax authorities. Under Rules 41 (2) read with 12 he was bound to submit the quarterly return and also deposit the tax due in accordance with the return.

The expression "tax'. admitted" in proviso . to Section 9(1) means tax admitted before the assessing authority and not hefore the appellate authority. A• par, ment of the admitt, ed tax is one of the cond1tlons for the maintainab11itv of the appenl, Section 9(1) would be rendered wholly useless, if it is interpreted to me:in ta~ admitted in the memorandum of appeal. Ordinarily. no interpretation •hould be placed on a provision which would have the effect of mnkin11 !he provision either otiose or a dead letter. [4260-H; 427A-DJ

Chanshyam Dass Balmukand v. The State of U.P. & Ors. (23 S. T.C. 282) and United Timber & Cmheu• Products (P) Ltd. v. Sales

1'ax Officer. Cannanor< (28 S.T.C. 526), overruled.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2300 to 2302 of 1969 and 14 & 15 of 1970.

Appeal by a special leave from the judgment dated August 7, 1968 and 18th August 1969 in Sales Tax Reference No. 574 of J 963. and Special appeal No. 330 of 1963, Misc. Application No. 177 of 1963 and S.A. Nos. 423 and 424 of 1968 respectively.

S. V. Gupte, K. L. Arora, S. K. Bagga and S. Bagga, for the nppellant.

N. D. Karklzanis and 0. P. Rana, for the respondent.

The Judgment of the Court was delivered by

HEGDE, J, These are appeals by special leave.

They are filed by the same assessee.

They arise from the decision of a Division Bench of the Allahabad High Court. The judgment under appeal not only deals with references made under the U.P. Sales Tax Act 1948 (hereinafter referred to as the Act) but also the two Writ Petitions filed by the assessee.

The assessee who is a registered dealer under the Act is having his business at Kanpur. It carries on business in hydrogenated oil and washing soap. It also imports and distributes vanaspati as an agent of Malwa Vanaspati and Chemical Company Ltd., Indore.

In these appeals we are concerned with the assessee's assessment of sales tax for the assessment year 1957-58. Its return for that year disclosed a gross as well as net turnover of Rs. 1,66,387.03 P. Along with its return the assessee paid Rs. l ,060.30P. towards the tax due. Before the assessing authority the assessee admitted that its tax liability was Rs. 10,339.l 9P. It is admitted as well as proved that the assessee had collected from its purchasers the said amount of Rs. 10,339.19P. The Sales Tax Officer after making certain enquiries came to the conclusion that the total turnover of the assessee during the assessment year in 4uestion was Rs. 58,06, l 32.30P. The assessee was given opportunity to show that the estimate made by the Sales Tax Officer was not correct. from the records of the case we find that as many as 30 adjournments were given to the assessee to establish its case but the assessee did not take advantage of those opportunities. The case was finally posted for bearing on 24th March, 1962. That day the assessee was absent; but it made an application for adjournment of the case by 15 days. That adjournment was not granted and it could not have been granted because the assessment would have been.barred by the end of the financial year 1961-62. Hence the

assessing authority, on the basis of its best judgment determined the A tum-over of the assessee at Rs. 58,06,132.30P. and determined its tax liability at Rs. 3,62,691.62P. under section 3A of the Act.,

Against the order of assessment the assessee filed an appeal within 30 days from the date of the order of assessment. At the time of filing the appeal the assessee deposited only a sum of Rs. 1, 600. In appears that the office of the AppcJlate Judge raised some objections as to the maintainability of tho appeal. Am:r receiving some explanation from the assessee the appeal was entertained and notice issued to the assessing authority. When the Sales Tax Officer put in his appearance in he appeal he objected to the maintainability of the appeal on the ground that the Priviso to Section 9 of the Act had not been complied with. That objection was accepted and the appeal was dismissed as not mainminable.

Thereafter at the instance of the assessee certain questions were referred to the High Court for ascertaining it~ opinion. During the pendency of that refernce the assessee filed a Writ Petition under Article 226 of the Constitution challenging the validity of the Notification issued under Section 3 A. Thereafter another application was made under Article 227 of the ConsHtution challenging the recovery proceedings. Both the Writ Petitions were dismissed. In the reference made by the AppcJlate Judge the High Court came to the conclusion that the appeal was properly dismissed.

Mr. Gupte, the learned counsel for the assessee-appellant E advanced the following contentions before us;-

(!) That the appeal was illegally dismissed;

(2) That the assessee-appellant being an importer cannot be considered as one of the successive dealers in the series of sales .as contemplated F by Section 3A; and

(3) That the Notification issued under Section 3A was ultra vires the power granted on the government.

In order to appreciate the contentions advanced, it is necessary to refer to certain provisions of the Aot

Section 3 ( 1 ) of the Act provides :

"Subject to the provisions of this Act every dealer shall, for each assessment year, pay a tax at the rate of three pies per rupee on his turnover of such year, which shall be determined in such manner as may be prescribed." (Remaining portion of the provision is not relevant for our purpose).

Section 3A(l) reads thus:

"Notwithstanding anything contained in Section 3, the State Government may, by notification in the official Gazette, declare that the turnover in respect of any goods or class of goods shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify." (Remaininl( por'tion of Section 3A is not relevant for our purpose).

Now we come to Section 9 ( 1) and this section provides :

. "Any dealer objecting to an order allowing or refusing an application for exemption certificate under clause

(b) of sub-section ( 1) of Section 4 or to an order refusing an application under Sec. 30 or to an order inposing a penalty under Section 15-A or an assessment made.under Section 7, 7-A, 7-B 18 or 21, may within 30 days from the date of service of the cfopy of the order or notice of assessment, as the case may be, appeal to such authority as may be prescribed :

Provided that no appeal against an assessment shall be entertained unless it is accompanied by satisfactory proof of the payment of the amount of tax admitted by the ap- .pe//ant to be due, or of ruch instalments thereof as may

have become payment : (emphasis supplied)" (Second Proviso is not relevant fcir our present purpose) . .. we may now turn to rules 12 and 41 (2). Rule 12 provides for the submission of the quarterly returns by an importer. Rule 41 prescribes the mode of submission of returns and assessment. Sub- Rl!ltl 2 of Rule 41 prescribes:-

"Before submitting. the return under sub-rule ( 1), the dealer shall deposit in the 'treasury the amount of tax calculated by him on the turnover shown in such return and shall submit the treasury challan with the return or submit with the return a cheque for the amount so calculated." (Proviso is not relevant for our present purpos~).

Having referred to the material provisions in the Act and the Rules, let us now turn biack to the contentions advanced before us.

We shall take up the last two contentions first, namely; that the assessee, who is an importer, not being one of the "successive dealers" could not have been brought to tax under section 3A and as H such the notification issued by the Government under section 3A bringing to tax the import of vam1spati rriade by the assessee from Indore under Section 3-A, is ultra vires.

It may be noted that Section 3 is the general provision.

It provides for multipoint tax. 12-L796Sup. CI/73

To this general Rule cartain exceptions are provided. One of the exceptions is that provided under Section 3A.

That Section permits the Government to Select certain items of goods foia single point levy.

Vanaspirti is one of the items of goods for a single point levy.

The appellant does not contest the competence of the legislature to enact Section 3A. It also does not contest 'th~ validity of the power conferred on the Government to select sale of certain goods for single-point taxation. What is contended on its behalf i. that section 3A provides that single-point levy can be imposed

nly on the "successive dealers" in the series of dealers; an importer is not one such dealer; he being the very first dealer in the

State. Undoubtedly, an importer is one of the dealers. He is the first dealer in the State. The chain of successive dealers begins from the first dealer and it goes upto the last dealer. Any one of the dealers in this chain can be considered as a "successive dealer".

The series do not being in the middle. It must necessarily begin at the very beginning. This is also. the view taken by the Allahabad High Court in Ram Kw:nar Rajendra Swaroop vs. Commissioner of Sales Tax ('). It is an obvious conclusion. If an importer is one of the successive dealers, which undoubtedly he is, necessarily the notification issued by the Government must be considered to be a valid notification. In this view we reject the last two contentions :advanced by Mr. Gupte.

Now turning our attention to the first contention advanced by Mr. Gupte, we find there are several difficulties in the way of acoeepting the same. As mentioned earlier the assessee in his 'return

has shown what its turnover was and at what rate the tax is pay- .able by it. It had admitted before the assessing authority what its turnover was.

Further it had also admitted before that aulhority that rt was liable to pay tax at the rate of one anna per rupee on its

tumO\'er which comes to Rs. 10.339.190. It had also admitted before the same authority that it had collected that amount from its purchasers. It did not dispute before the assessing authority the validity of the notification issued under section 3A. Under Rule 41 (2) read with Rule 12 it was bound to submit quarterly returns.

We take it that it must have submitted its quarterly returns. Under "Sub-rule 2 of Rule 41 the assessee was bound to deposit the tax due from it according to its returns. In other words even according to the assessee it was bound to deposit into the Treasury or pay cheqUe to the assessing authority of Rs. 10,339.19p. Admittedly, it Jiad not done so: What is urged by the learned counsel is that whatever might be the facts admitted in the return and whatever might be the admissions made before the assessing authority it was open to the assessee to take a different stand in its memorandum of appeal and what is relevant for the purpose of Section 9 is the

(I) 19 ST.C 241.

...

' ..

stand taken by the assessee in the memorandum of appeal. In support of that contention two decisions; One of the Allahabad High Court in Ghansh, vam Dass Balmukund. vs. The State of 1 , Uttar P.radesh & Ors. ( 1) and the other of rthe Kerala High Court in United Timber & Cashew Products (P) Ltd. vs; Sales Tax Officer, Cannanore,(') were cited .. Those decisions undoubtedly sup-_ port the contention of the Appellant but we find it difficult to accept the conclusions r.eached by the Allahabad High Court and the Kera la _High Court. In his decision the learned single Judge or

the Kerala High Court has merely followed the Allahabad High Court's.decision. If we come to the conclusion that the expression "tax admitted" in the proviso to Section'9(1) means that admitted in the memorandum of appeal, section 9 can be made whollyuseless.

All that an asses.see has to do is not to admrt his liability in the memorandum of appeal, whatever his stand might have been before the assessing authority. Ordinarily no interpretation should be placed on a provision which would have the effect of making the provision either otiose or a dead letter. Further, to find out the true meaning of the expression "tax admitted" we must take into consideration the remaining words of the proviso namely "or such instalments thereof as may become payable". Those words furnish

a key to the interpretation. If one of the conditions for maintainability of the appeal is payment of the instalments which have become payable under Rule 41 (2). It means that th.e admission that has got to be taken into consideration is that made before the assessing authority and not before the a12pellate authority. 1kit

apart we do not think that the stand taken by the Appellant before the appellate authority can be considered as a qona fide stand.

We are of the opinion that the contention taken by the appe'.hat, before the appellate authority that it cannot be brought within the scope of section 3A of the Act was an after-thoµght.

No such contention was taken before the assessing authority. If the :issessee believed that contention to be true it would not have collected from. its _purchasers the tax @ 1 anna per Rupee Further it is now well settled by the decision of this court that no . one can challenge the .validity of a provision of an Act or Rule made thereunder or .even a notification issued either under the Act or under the Rules made before the authorities constituted urider the - Act. It is true as contended by Mr. Gupte that these decisions were rendered long after 1962 but the fact remains that the decisions in question merely interpret what the law is .

We find neither merit nor equity in these appeals.

Hence these appeals are dismissed with costs; hearing fee one set.

SBW

(I) 23 S.T.C. 282.

Appeals dismissd.

(2) 28 S.T.C. 526. c

S. KANPUR VANASPATI STORES, KANPUR

January 22, 1973

K. S. HEGDE

P. JAGANMOHAN REDDY

Salts Tax Act

Sec. 3A

Sec. 9(1)

Sec. 9

Sec. 9

section 3A

Section 3A

section 3(A)

section 9( I)

section 3

Section 9(1)

Section 9(1)

CIVIL APPELLATE JURISDICTION

S. V. Gupte

K. L. Arora

S. K. Bagga

S. Bagga

N. D. Karklzanis

0. P. Rana

HEGDE

Sales Tax Act 1948

Kanpur

Indore

24th March, 1962

section 3A

Section 9

Article 226

Section 3

Article 227

Gupte

Section 3A

Section 3A

Section 3

Section 3A(l)

Section 3

Section 3A

Section 9

Section 4

Sec. 30

Section 15

Section 7, 7

section 3A

section 3A

Section 3

Section 3

Section 3A

Section 3A

section 3A

Allahabad High Court

section 3A

Section 9

Allahabad High Court's.decision

section 9

section 3A


VEERPAL SINGH

DEPUTY REGISTRAR, CO-OPERATIVE SOCIETIES,

MEERUT & ORS.

January 23, 1973

[S. M. S!KRI, C. J., A. N. RAY, D. G. PALEKAR, M. H. BEG AND

S. N. DWIVEDI, JJ.)

Ulli<r Pradesh Co-operative Societies Act, 1965, Ss. 38 and 128- Deputy Registrar passing orders for removal of members of Boc.V-d of Directr2rS of Dist.

Cooperative Societies Federation Buk:ndshahr on the ground that the Unions represented by them were in default within the meaning of bye-law No. 1 (Ta) of the Federation-Deputy Registrar further ordering annulment of resolutions Committee of management en the ground that the proceedings were not in compliance with bye-law!

No. !O(cha) and No. II-Legality of Deputy Registrar's orders.

The petitioner was a delegate from the Oo-operative Federation of Unchagaon to the Bulandshahr Dis!¢tl Cooperative!

Federation. In the prest writ petition under Art. 32 of the Constitution he challenged the orders of the Deputy Registrar Cooperative Societies (i) removing him and two other delegates from the membership of the Board of Directors of the Federation i.n exercise of powers under s. 38 of the U.P. Cooperatives Societies Act 1965 on the ground that their Unions were defaulters in respect of their dues to the Federation thus attracting bye-law No. I (Ta) of the Fed., ation; (ii) annulling in exercise of powers u.nder s. 128 of thl! Act. The resolutions of the Committee of Management dated 15th. March 1972 ;,,, favour of the petitioner end the other two other delegates on the g'round tbat the minutes of the meeting in which the resolutions were passed were not -recorded by the Secretary and the proceedings were thus in violation of bye-laws No. 10

(cha) and No. 11.

Allowi; ng the petition,

HEW: (I) The Deputy Regis!rar could not rely on bye-law No. 1 (Ta) to justify the removal of the petitioner and the two othtjdelegates from the membership of the Board of Directors. The Federation was not a credit society. The Federation did not have any loan transaction with the co-operative unions.

The co-operative unions did not have any loan !ransactions wilh the petitioner. The dues of the co-operative unions were in respect of supplies of goods by the Federation to the C0-opt:rative unions. These were commercial transactions.

These were commercial debts.

Price of goods supplied if outstanding does not constitute Joan within the meaning of the bye-law. The impugned 9fder \Vas eintirely on an illegal basis and wrong interpretation of the bye-law. The order was bad. [435F-H; 436A-B]

(2) The meeting of the Federation on 15th March, 1971 w., properly conducted. The Chairman rightly appointed an lected Director to record the minutes of the meeting 'in view of the wilful absence of the Secretary. Section 188 of the Act also protects the proceedings of the meeting. The Deputy Registrar acted illegally in annulling the ..,_.olutions of the Federation held on 15th March 1971. [436G-lll

VEERPAL V, DY. REGIS. CU-OP, SOCIETIES (Ray, J,) 431

ORIGINAL JURISDICTION : Writ Petition No. 214 of 1972.

(Petition under Article 32 of the -Constitution of India for the enforcement of fundamental rights).

A. P. Singh Chauhan and N. N. Sharma, for the petitioner.

A. K. Sen and 0. P. Rana, for the respondent.

The Judgment of the Court was delivered by

RAY, J.

The petitioner in this writ petition under Article 32 of the Constitution asks for quashing of orders of the respondent Deputy Registrar, Co-operative Societies, Meerut dated 2 May, 1972.

By the said order dated 2 May, 1972 the respondent Deputy Registrar removed Rajendra Singh, Yograj Singh and the petitioner V eerpal Singh from the Board of Directors of the District Co-operative Federation, Bulandshahr referred to as the Bulandshahr Federation and declared them to be disqualified to the office of the Directors of the Bulandshahr Federation for a period of three years from the date of the order.

Rajendra Singh, Yograj Singh and the petitioner Veerpal Singh were delegates from the Co-operative Unions of Jarcha, Raura and Unchagaon respectively to the Bulandshahr Federation.

The circumstances under which the aforesaid order came t'O be passed are these according to the Deputy Registrar. There was an inspection in the month of February, 1971 by the Deputy Registrar, Co-operative Societies, Uttar Pradesh aboun the constitution, working and financial condition of the Bulandshahr Fede-. ration. The Deputy Registrar found that the three constituent members of the Federation, viz., Sehkari Sangh Raura, Sehkari Sangh Jarcha and the Co-operative Union Unchagaon were defaulters in respect of their dues to the Bulandshahr Federation.

Therefore the delegates from these three constituen~ members at Raura, Jarcha and Unchagaon were not.qualified to be elected as members of the Board of Directors of the Bulandshahr Federation.

The annual general meeting of the Bulandshahr Federaion in spite of such disqualification of those three delegates elected them as Directors of the Bulandshahr Federation. The Federation in accordance with their resolution dated 3 April 1971 stated that the three constituent members at Raura, Jarcha and Unchagaon were n~ defaulters. The Deputy Registrar stated that if a member union was a defualter such member-union was diqualified and the disqualification attached to the delegates of such a union. The Deputy Registrar gave the Federation notice under scct:ion 3 8(2) of the Uttar Pradesh Co-operative Societies Act 1965 referred to .as the Act to comply with the requirements in the inspcct:ion note.

,, " 432

SUI'REME, COURT REPORTS Ll973] J. .s.c, K.

The Federation did not comply with the requirements indicated in the report of the inspection note. The Deputy Registrar therefore passed the said order dated 2 May, 1972 .

' It is necessary to refer to certain other events which took place prior to the passing of the said order. The Bulandshahr Federation held its annual general meeting on 20 March, 1970 .. At the annual general meeting the committee of management was elected.

The petitioner was elected one of the Directors constituting ' th.: committee of management of the Bulandshahr Federation. In the month of April 1970 the petitioner was unanimously elected as Chairman of the Bulandshahr Federation,

After the Deputy Registrar Co-operative societies sent a copy of the inspection rep<?rt dated 10 February 1971 the committee of management of the Bulandshahr Federation considered the inspection report at a meeting held. on 3 April 1971. . The Petitioner Veerpal Singh, Rajendra Singh and Yograj Singh did not parti, cipate at the meeting inasmuch as the inspection note relatcc\ to their. allege, d disqualification. The committee. of management of the Bulandshahr Federation recorded that Shri L. N. Batra, Sub- Divisional Magistrate, Khurja as a Scrutiny Office~ in his judgment dated 5 March 1970 in _connection, with the nomination papers of Yograj Singh, Rajendra Singh stated that they were not defaulters and they were competent for , membership of the Board of

Diretors. The committre of management of the Bulandshahr Federation further resolved that none of the three persons namely, the petitioner, )' ograj Singh and Rajendra Singh had pe1sonally taken any loan from the Bulandshahr Federation . nor had the constituent members viz., the Unions at J archa, Raura and Unchagaon ever taken any loan from the Bulandshahr Fede ration. The Committee of Management therefore unanimously decided that the petitioncr,'Yograj Singh and Rajendra Singh were not disqualified to be members of the committee of management of the Bulandshahr Federation. The committee of management appointed a committee consisting of Yashpal Singh and Prahlad Swarup for making enquiry in respect' of amounts outstanding against the Unions atJarcha, Raura and Unchagaon as mentioned in the inspection note.

The ):Jetitioner further alleges that on 10/15 July, 1971 the Deputy Registrar, Co-operative Societies in collusion with the out going Deputy Registrar obtained an order removing the petitione1 under section 38 of the Act from the directorship of the Federation and also disqualifying him for a period of three years from holding any office undg the Federation. The circumstances under which the order dated ,10/15 July 1971 was passed were that the primary society at Unchagaon from which the petitioner was a delegate to the Bulandshahr Federation was in arrears and .'.the

I"· •

• '-rl

~ ,.

(~ I

,,- .. .,

• ...

• (

It . ' \

• .,

, prim.ary society at Unchagaon w~{aske_d. to om ply with the reqmrcments of the Act and remove the arrears, The. Bulandshahr Fcocration was also asked to secure: compliance by the primary society with the'provisions of the .Aci. Neither the Bulandshahr Fedfration nor the prin1ary society at Unchagaon wiped out the arrears, Therefore,: according to the Deputy Registrar, the pei tjciner was disqualified to be a delegate from the primary society at :un'chagam1. 'r . . .

Simultaneously with. the removal of the petitioner from the coininittee of management of the Buland.shahr Federation, the Deputy Registrar passed similar orders for removal of Y ograj from the Bulandshahr Federation. Rajendra Singh' and Yograj Singh were delegates from the Co-operative Unions at J archa and Raura.

I , . .

, Y, ograj Singh therea[tcr made an application under Article 226 of: the Constitution before the Allahabad High Court. and impeached the order dated 10/15 July, 1971 removing him from the. ccimmitee of management of the Bulandshahr Federation. The High Court at Allahabad by its judgment dated 21 February, 1972 quashed the order dated 10/15 July, 1971 by which the Deputy Registrar had removed Yograj Singh from the committee of management. The High Court held that no individual notice had beert given to Y ogra.i Singh and further tlrnt the inspection note was not a notice to the Society within the , meaning of sectkirt 3l!'(l) of the Act.' . ' . , .. , .. ' " .· . · . t

; In view of the decision of the Allahabad High Court the com- . mittce of management of the Bulandshahr Federation reinstated

Yograj Singh, Rajendra Singh and the petitioner on 15 March, 1972.

 : On 20 March, 1972 the Deputy Registrar Cooperative Societies issued a, notice to the Federation under section 128 of the Act to annul the resolution of the Federation dated 15 March, 1972 reinstating the . petitioner, Yograj Singh and Rajendra Singh. The Deputy Registrar on the same day issued another notice to the Bulandshahr Federation under section 38 ( 1) of the Act to show cause as to why action for removal of. the petitioner and Yograj Singh and Rajendra_Singh on !he basis of the delinquency indicated in the inspection note dated 10 February, 1971 should not be .taken. ·

The petitioner on 24 March, 1972 and again on 29 April, '- 1972 sent two communications to the Deputy Registrar, Cooperative Societies. These two communications were in answer to the notice dated 20 March, 1972 to show cause as to why the resolu-· tion reinstating the petitjoner, Yograj , Singh and Rajendra Singh should not be annulled and also as to why they should not be

removed. In the notice dated 20 March 1972 for annulment of the proceedings of the committee of management of the Bulandshahr Federation the Deputy Re.gistrar alleged that the proceedings of the committee were no~ in accordance with the provisions of bye-law No. IO(ch) and bye-law No. 11 of the registered bye- Jaws of the Federation. Therefore, the Deputy Registrar gave notice under section 128 of the Act for annulment of the resolution. The petitioner in t'he answers dated 24 March, 1972 and 29 April, 1972 stated that there was no violation of bye-laws.

The petitioner further stated that the Secretary Tara Chand Sharma wilfully absented himself from the meeting and was therefore a disobedient Secretary who did not carry on the work under the supervision and guidance of the Chairman.

The petitioner further stated that the procedure at the meeting held on 15 March, 19.72 was lawful. The meeting was conducted by the.acting Chairman Shri Ch. Shahmal Singh who was empowered under bye-law No. I 0 to conduct the meeting. The proceedings of the meeting were recorded by an elected Director Shri Prahlad Swarap, Advocate who was duly appointed for that purpose Section

118 of the Act was relied on by the petitioner to contend that no act of a committee of management shall be deemed t.o be invalid by reason of any alleged defect in the appointment of an officer or on the ground that such officer was disqualified for such appointment or election. The petitioner alleged that the Bulandshahr Federation directed the Secretary Tara Chand Sharma on

10 April 1972 to summon the meeting of the committee of management of the Bulandshahr Federation to consider the pros and cons of the notice dated 20 March, 1972 issued by the Deputy

Registar. The petitioner further alleged that Tara Chand Shanna was acting under the directions of the Deputy Registrar, Cooperative Societies. Therefore, the petitioner alleged tha~ the Deputy Registrar was not competent and justified to annul the resolution of the committee of management of the Bulandshahr Federation at the meeting held on 15 March, 1972 under secon 128 of the Act.

With regard to the other notice dated 20 March 1972 under section 38 of the Act to show cause as to why the petitioner and the other two delegates from J arch a and' Raura should not be removed, the petitioner alleged that under section 27 of the Act the Registrar has power to remove or expel a person from its membership of the society (a) if the person has ceased to fulfil the qualifications required for membership or is disqualified ao be a member under the Act, or (b) if the person was admitted to the. membership of the society in contravention .of the provisions of the Act or the rules or of the bye-laws of the society.

The petitioner also referred to Rule 453(1)(0) of the Uttar Pradesh Cooperative Societies Rules 1961\ referred to as the Rules

which provides tha.t no person shall be eligible to be, or to continue as, a member of the committee of management of any cooperative society, if he is otherwise disqualified under any of the provisions of the Act or the rules or of the bye-laws of the society.

Bye-law No. 1 (Ta) of the Bye-laws of the Federation provides that no persoo shall be eligible to be or continue as a member of the committee of management if he, in respect of any loan or loans taken by him, is in default to the Federation or to any other society or the society he represents is in default to the Federation for a period of at least six months. ·

The allegations made by the Deputy Regist; rar were that the Sehkari Sanghs of Jarcha, Raura and Unchagaon were defaulters to the Federation for the sums of Rs. 4443.04, Rs. 877.43 and Rs. 515.35 respectively for a period exceeding six months as indicated in the inspection report dated 10 February, 1971.

The first question which arises for consideration is whether t, he petitioner was. a defAulter within the meaning of the Act or the bye-Jaws as alleged in the impeached order. The Secretary of the Federation wrote a letter dated 22 July, 1971 to the Assistant Registrar, Cooperative Societies and stated that the three cooperative Unions at Jarcha, Raura and Unchagaon owed money to the Federation in respect of supplies of fertilisers by the Federation to those three Unions. The Secretary of the Federation also gave a certificate that none of the three cooperative Unions at I archa, Raura and Unchagaon ever took any loan from the Federation.

The petitioner and the other .two persons who were delegates from the three cooperative Unions did not owe any money whatever. to the cooperative Unions or to the Federation.

The Federation is a District Cooperative Federation within the meaning of rule 2(o). That rule states that a District Cooperative Federation means a Central society which inter a/ia is not a credit society. A credit society is defined in rule 2(h) to mean a society which has as its primary object the raising of funds to 1x. lent to its members. Rule 453 in sub-section (1) clause ( o) states that if a person is disqualified under the provisions of the Act or the rules or of the bye-laws of the society he shall not be eligible to be, or to continue as, a member of the committee or management The Deputy Registrar relied on bye-law No. I (Ta) of the

Fede; ation which renders a person to be ineligible to be. or to continue as a member of the committee of management if he is in default to the Federation or to .any other society. That bye-law further provides that if the society he represents is in default lie .be ineligible.

The Federation is not a credit society. The Federation does not have any loan transactions with the Cooperative Unions. The

Cooperative Unions did not have any loan transactions with the petitioner. The dues of the Cooperative Unions are in respect of supplies of goods by the Federation to the Cooperative Unions.

These are commercial transactions. These are commercial debts.

Price of goods supplied, if outstanding, does not constitute a Joan within the meaning of the bye-law. The impugned order proceeded emirely on an illegal basis and wrong interpretation of the bye-law. The order is bad.

The other question which. arises for consideration is whether the Registrar has power under section 128 of the Act to annul the resolutions of the society. The Registrar proceeded on the footing that the minutes of the meeting of the Federation held on 15 March, 1971 were not correctly recorded, The Deputy Registrar alleged thnt the, Federation did not comply with the provisions of bye-law No. lO(Cha) read with bye-law No. 11 of the Federation in regard to the conduct of the meeting. Bye-law No. 11 deals with recording the proceedings of the meeting. That bye-law s!ates that the minutes shall be recorded in the book lo be kept for the purpose and the minutes shall be signed by the person presiding an the meeting as well as by the Secfetary of the Federation. Bye-law No. IO(Cha) states that the Secretary shall be the Chief Executive officer of the Federation and subject to control and supervision of the Chairman and the committee of management as provided in the rules or the bye-law. It is also stated in bye-law No. 10( cha) that the Secretary shall inter alia sign and authenticate all documents in and on behalf of the Federation and is responsible for the proper maintenance of various books and records of the Federation.

The facts with regard to the meeting of the Federation held on 15 March, 1971 are that the Secretary wilfully absented hiinself at the meeting. The Federation therefore contended that the Secretary disobeyed the instructions. The Chairman under bye-law No. 10 is responsible for the control, supervision and efficient administration of the Federation. The Chairman appointed an elected Dim:tor Shri Prahlad Swarup, Advocate for the purpose of recording the minutes. Under section 118 of the Act no act of a cooperative society or any committee of management shall be deemed to be invalid by reason of the existence of any defect in the constitution inter alia of committee or in the appointment of an officer of a cooperative society or on the ground that such officer was disqualified for such aPJ'ointment. The meeting of the Federation on 15 March, 1971 was properly conducted. The Chairman rightly aooointed an elected Director to record the minutes in view of the wilful absence of the Secretary. Section 188 of the Act also protects the proceedings of the meeting. The Deputy Registrar acted illegally in annuling the resolutions of the Federation held on 15 March, 1971.

For these reasons the two orders of the Peputy Registrar dated 2 May, 1972 which are impeached by the petitioner are set aside and qua, hed .

. Petitioner will be entitled to costs to be paid by the respondents The order dt. 12th October 1972 for payment of costs as Rs. 300 B is cancelled.

G.C.

VEERPAL SINGH

A. N. RAY

D. G. PALEKAR

M. H. BEG

S. N. DWIVEDI, JJ.

Ss. 38 and 128

Art. 32

s. 38

Cooperatives Societies Act 1965

s. 128

15th. March 1972

15th March, 1971

Section 188

Article 32

Constitution of India

A. P. Singh Chauhan

N. N. Sharma

A. K. Sen

0. P. Rana

RAY

Article 32

Rajendra Singh

Yograj Singh

V eerpal Singh

Bulandshahr Federation

Rajendra Singh

Yograj Singh

Veerpal Singh

Jarcha

Raura

Unchagaon

Uttar Pradesh

Bulandshahr Fede-. ration

Sehkari Sangh Raura

Sehkari Sangh Jarcha

Co-operative Union Unchagaon

Bulandshahr Federaion

SUI'REME

20 March, 1970

L. N. Batra

ograj Singh

petitioncr,'Yograj Singh

Yashpal Singh

Prahlad Swarup

atJarcha

section 38

Article 226

Allahabad High Court

10/15 July, 1971

High Court at Allahabad

21 February, 1972

section 128

section 38

29 April, '- 1972

Yograj

Singh

20 March 1972

section 128

Tara Chand Sharma

15 March, 19.72

Ch. Shahmal Singh

Prahlad Swarap

Section

118

10 April 1972

Tara Chand Shanna

section 38

section 27

Raura

Unchagaon

10 February, 1971

22 July, 1971

I archa

section 128

15 March, 1971

section 118

Section 188

2 May, 1972

12th October 1972