IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 5478 of 2000 For Approval and Signature: Hon'ble MR.JUSTICE JAYANT PATEL ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO @ SHANTINIKETAN COOP HOUSING SOCIETY LTD. Versus DISTRICT REGISTRAR CO-OP. SOCITIES -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 5478 of 2000 MR MIHIR H JOSHI for Petitioner No. 1 GOVERNMENT PLEADER for Respondent No. 1 Mr.Girish Patel for MR SHALIN N MEHTA for Respondent No. 2-3 -------------------------------------------------------------- CORAM : MR.JUSTICE JAYANT PATEL Date of decision: 29/04/2002 C.A.V.JUDGEMENT Rule. Mr.I.M.Pandya, Ld.AGP waives service of rule on behalf of respondent No.1 and Mr.Girish Patel, Sr.Counsel for Mr.Shalin Mehta waives service of rule for respondent No.2 & 3. With the consent of parties matter is being disposed of finally. 2. The short facts of the case are that the petitioner is a Housing Cooperative Society duly registered under the Gujarat Cooperative Societies Act, 1961 (hereinafter referred to as the "Act"). One Gopalbhai Narottamdas Mehta was the member of the petitioner-Society and he was allotted shares by the petitioner-society and in capacity as a shareholder of the petitioner-society said Gopalbhai Mehta was also allotted Plot No.4 in the petitioner-society and he had constructed residential house over the said plot on 8.1.1981. Gopalbhai during his life time at the age of about 80 years executed a registerd will for creating a trust after his death for the benefit of members of his family. On 31.5.90 Gopalbhai died and as per respondent Nos 2 and 3 the property of Gopalbhai vests with them as the trustees of the trust created under the aforesaid will. In the year 1994 probate was issued by the City Civil Court, Ahmedabad. Since one of the trustees, i.e. Naresh H.Shah, the respondent No.2 herein, the permission was obtained by him to work as the trustee of Shri Gopalbhai Narottamdas Mehta Family Trust (hereinafter referred to as "the Trust"). The trustees as per Indian Trust Act, 1882(hereinafter referred to as "the Trust Act") were holding the property and therefore that they had to for for transfer the aforesaid property and the shares of the society and an application was made by respondent Nos 2 & 3 to the society with a request to transfer the shares on their names. The society continued to make correspondance from 24.5.95 onwards. Thereafter, on 27.8.95 the Secretary of the pettiioner society addressed a letter intimating that as per the legal opinion the shares can be transferred on the name of the trustees of the trust once such family trust is formed after due permission of the Reserve Bank of India. In response to the same the respondent No.2 addressed a letter dated 30.8.95 stating, interalia, that the permission has been granted by the Reserve Bank of India for respondent No.2 to work as a trustee since he is a Non-Resident Indian (hereinafter referred to as "NRI"). Thereafter, on 20.2.96 the society addressed a letter to the respondent No.3 to produce fresh set of papers which ultimately came to be submitted by respondent Nos 2 and 3. Not only that but the respondent Nos 2 & 3 submitted written opinion of Juistice B.J.Diwan (Retd), Chief Justice of Gujarat High Court daated 10.2.1997 opining that the respondent Nos 2 & 3 can not compel the society to recognise them as executor instead of recognising them as trustees and further tht one of the trusteees alone can not represent the trust property in view of the will. Further opinion of Shri S.N.Shelat, Sr.Advocate, dated 12.9.97 was also submitted opining that the respondent Nos 2 & 3 can function as trustees and the society is also bound to transfer the shares in favour of trustees on the basis of probate,. Thereafter, on 2.2.98 a letter was addressed by the society to respondent Nos 2 & 3 requesting that their proposal to transfer the property on the name of trustees shall be placed in the next meeting of the Managing Committee and it was also stated that in the meantime the respondent Nos 2 & 3 may sign and return in duplicate the undertaking as per the enclosed draft so that necessary procedure can be taken up as early as possible. On 4.2.98 a letter was addressed by respondent Nos 2 & 3 to the society stating that they are not agreeable to sign the undertaking to abide by all the approved rules, regulations and bye laws of the society for transfer of the bungalows on their names. Thereafter, on 30.4.98 a letter was addressed by the society to the District Registrar requesting for opinion and permission to transfer the property on the name of trustees and in the said letter it was stated interalia that as per the opinion of legal adviser of the society the property can not be transferred on the name of trustees of the trust because one of the trustees, i.e. the respondent No.2 herein, is a French citizen and not a domicile of India. In the said letter there was also a reference that as per the opinion of Shri B.J.Diwan, Retd.Chief Justice of Gujarat High Court that the respondent No.2 can be call as a domicile of India because he has not relinquished his Indian Domicile and therefore the guidance and opinion was sought for from the District Registrar. 3. Since the question regarding the domicile was raised in the letter dated 30.4.98 of the society, the District Registrar, the respondent No.1 herein, addressed a letter dated 22.7.98 stating that the power to take decision is vested in the Civil Court and after the decision is obtained from the Civil Court, proper action may be taken for membership. Said letter of the District Registrar was forwarded to respondent Nos 2 & 3 as per their letter dated 12.8.98 and therefore the respondent Nos 2 & 3 addressed a letter dated 30.10.98 stating that the City Civil Court, Ahmedabad had already issued probate in their favour on 12.8.94 and the respondent Nos 2 & 3 have authority to represent the property as per the will. Thereafter, the District Registrar, i.e. the respondent No.1 herein addressed a letter dated 2.11.1998 to the petitioner society stating that as the probate has been issued by the City Civil Court and as per the will the respondent Nos 2 & 3 are the executors and the trustees, the necessary action may be taken for admitting their name as the members. Thereafter, a meeting of the Executive Committee of the petitioner society was held on 11.8.98 and vide resolution No.2 a decision was taken to transfer the shares on the name of respondent Nos 2 & 3 as the trustees of the trust. Thereafter, on 10.2.98 in response to resolution dated 18.11.1998 the shares were submitted by respondent Nos 2 & 3 for transferring and ultimately as per letter dated 18.12.1998 the procedure for transfer of shares was completed and the shares after transfer were returned back by the society to respondent Nos 2 & 3 and on account of such transfer on 28.12.1998 necessary transfer fee was also paid by respondent Nos 2 & 3 to the petitioner society. 4. Thereafter, on 20.10.1999 the Asst.T.D.O of Ahmedabad Municipal Corporation issued a letter to the petitioner society stating that for plot No.4 high rise construction plan was submitted and if the society has any objection the same may be intimated. In response to said letter the petitioner society addressed a letter dated 17.1.2000 to the Asst.TDO, Ahmedabad Municipal Corporation stating that there are outstanding municipal taxes of about Rs.36,000/- and as proper persons have not signed, the society is objecting to the sanction of plan and therefore same may not be sanctioned 5. The petitioner society filed Civil Suit No.330/00 in the City Civil Court at Ahmedabad as well as respondent No.2 & 3 herein challenging the action for utilising the property for commercial use of the property by respondent Nos 2 & 3 and Notice of Motion being No.1510/00 was also preferred below which exparte interim relief against the Ahmedabad Municipal Corporation was granted by the City Civil Court on 6.6.2000. Initially, the petitioner society who was plaintiff in the aforesaid Civil Suit did not join respondent Nos 2 & 3 as party and thereafter subsequently after the exparte injunction was granted they were joined as party. Upon the inquiry made by the court about the status of the suit it is declared before the court that respondent Nos 2 & 3 have submitted a pursis before the City Civil Court that they are withdrawing plans for commercial use and construction and therefore the Notice of Motion is accordingly disposed of and the civil suit is pending before the City Civil Court, Ahmedabad. Pending the civil suit before the City Civil Court at Ahmedabad on 12.6.2000 immediately after obtaining exparte interim injunction from the City Civil Court with a view to create a clog over the title over the property the present pettiion is filed by the pettiioner society challenging the letter dated 2.11.1998 of the District Registrar referred to hereinafter whereby the District Registrar had communicated to the petitioner society that since the probate has been granted by the City Civil Court, Ahmedabad the respondent Nos 2 & 3 are the trustees of Plot No.4 and therefore necessary action may be taken for entering their names as members. 6. Mr.Mihir Joshi appearing for the petitioner submitted that the letter dated 2.11.1998 is in breach of principles of natural justice and in his submission the only source of power for issuing said letter is under section 11 and since no hearing has been given to the society the letter which is titled by him as order in his submission is void. Mr.Joshi further submitted that as per section 22(1)(f) of the Act only public trust can become member of a society and private trust can not become a member. He further submitted that the trustees who are admitted as members or in whose name the shares have been transferred can not be said to be individual/individuals competent to contract under Indian Contract Act and therefore can not be admitted as member of a society even under section 22(1)(a) of the Act. In furtherance of his submission Mr.Joshi submitted that the trustees are not becoming members in their individual capacity but they are becoming members as trustees and Mr.Joshi submitted that the trustees are only nominal owner of the property and the real owners are the beneficiaries and therefore Mr.Joshi submitted that even the beneficiaries of the trust must also be the persons who are competent to contract and in his submission if such interpretation is not made things which can not be done directily will be permitted to be done indirectly and therefore Mr.Joshi submitted that as per section 22(1)(a) of the Act the trustee and the beneficiary, both must be competent to enter into contract. Mr.Joshi relied upon the decision of the Bombay High Court in the matter of Shri Govardhandhari Devasthan, Kopargaon vs Collector of Ahmednagar reported in AIR 1982 Bom 332 and of the Apex Courtin the matter of State Bank of India vs Special Secretary, Land & Land Revenue & Reforms & Land & Land Utilisation Department of West Bengal reported in 1995 Supp(4) SCC 30 to contend that the trustees are only nominal owners and the beneficiaries are the real owners. Mr.Joshi submitted that in any case so far as the Housing Coop.Societies are concerned the trustees can not be admitted as members because the Housing Coop.Society is a need based society and so far as the trustees are concerned they have no need of their own and Mr.Joshi also relied upon some observations of International Cooperative Alliance to submit that the membership should be granted to only those persons who are in need of that and can contribute to the objects of the society. Mr.Joshi further submitted that as per the information of the petitioner one of the trustees is a French citizen and merely because the Reserve Bank has granted permission to function as the trustee, he does not become Indian domicile, therefore also, since he is not an Indian citizen he can not be a member of the society. 7. Mr.Girish Paqtel, Ld.Senior counsel appearing with Mr.S.N.Mehta for the respondent Nos 2 & 3 submitted that in reality the letter dated 2.11.1998 is not a mandatory order but is a letter in the form of opinion. Mr.Patel further submitted that the whole petition is nothing but a counterblast to the submission of construction plan by the respondent Nos 2 & 3, though the respondent Nos 2 & 3 subsequenjtly have withdrawn such plan. Mr.Patel submitted that there are large number of suppression of material facts in the petition including the documentary evidence of correspondance between the petitioner society and respondent Nos 2 & 3. Mr.Patel further submitted that the impugned letter which is in the form of opinion was invited by the petitioner society itself and not only that but the said opinion is accepted by the petitioner society, and thereafter, on 18.11.1998 the Managing Committee of the society has admitted the respondent Nos 2 & 3 as members and they have transferred the shares and not only that but the respondent Nos 2 & 3 continued to function as the members of the petitioner society and under the circumstances the society can not complain that the impugned letter is in breach of principles of natural justice. Mr.Patel further submitted that not only this petition is barred by delay and laches but there is also malafide intention on the part of the petitioner society to challenge the action after a period of about 19 months and in his submission in reality section 11 has no applicability and he further submitted that even if the order is void or the action is void in view of the conduct of the petitioner, the petitioner is not entitled to invoke the equitable jurisdiction of this court under Article 226 of the Constitution. Mr.Patel further submitted that section 22 is for all Cooperative society and that interpretation can not be restricted keeping in view Housing Cooperative Society. Mr.Patel further submitted that the trustees are the owners of the property so far as the world at large is concerned save and except the beneficiaries of the trust. Mr.Patel further submitted that the trustees are individuals competent to contract and they are bound by the provisions of the Act, Rules and Byelaws and keeping in view the objects of the Act it must be interpreted that all the individuals may be in different capacity can be admitted as members and in his submission there is nothing in the Act to prohibit the trustees as the owners of the trust property. Mr.Patel further submitted that there is no rationale in putting such restriction upon the word "individual" because the trustees are the individuals who are acting in furtherance of the trust deed. Mr.Patel submitted that if the interpretation results into public policy then only the restricted meaning can be given and in the submission of Mr.Patel the HUF and the trustees are at par. Mr.Patel submitted that the Division Bench of this court has taken a view in the matter of Jain Merchants Coop.Housing Society Ltd vs HUF of Manubhai Kalyanbhai Shah through its Manager Harishbhai Manubhai Shah reported in 36(1) GLR 19 that even the HUF is included in the word "individual" and therefore in the submission of Mr.Patel there is no reason to exclude the trustees who are in reality individuals for holding the property and even for the larger interest of the beneficiaries. Mr.Patel submitted that if the contention of Mr.Joshi is accepted that if the beneficiaries are not competent to contract the trustees can not be admitted as members would create not only chaotic situation but would be against the larger public interest in as much in the given case if the trust is created for the benefit of minor, the trustees will not be able to hold the property and can not use the same and therefore if such interpretation as canvassed by Mr.Joshi should not be accepted. Mr.Patel submitted that the interpretation of word "individual" in section 22 of the Act can not given keeping in viewq only the properties of the Housing Cooperative Society when the Act provides a general clause. Mr.Patel submitted that when the permission is granted by the Reserve Bank of India to respondent Nos 2 & 3 to include as trustees as per the trust deed they can not be said to be improper trustees and in any event such objection can be heard by the court only if the beneficiaries are complaining about the same. Mr.Patel submitted that so far as the society is concerned it can not raise any objection regarding the capacity of the trustees, more particularly, when the probate has been granted by the competent court. Mr.Patel lastly submitted that since this petition is preferred with malafide purpose and there are large number of suppression of material facts, in his submission, the same are sufficient to dismiss the petition and therefore he prayed for dismissal of the petition. 8. Mr.I.M.Pandya, Ld.AGP appearing for the District Registrar submitted that the District Registrar has only given instruction which is not an order and it is not compulsory to the society to follow the same. Mr.Pandya mainly adopted the arguments on the question of interpretation of section 22 of the Act and also on the conduct of the petitioner society as canvassed by Mr.Patel. 9. In view of the above rival contention of the parties the following questions arise for consideration of this court: (i) Whether the trustees who are individuals can become members of the society registered under the provisions of Gujarat Cooperative Societies Act? (ii) Whether it is open to the Society to challenge the status of the person as the member once after the society having admitted the person as a member? (iii) Whether the person can be permitted to invoke the jurisdiction of this court under Article 226 of the Constitution who is a party to the voluntary action under challenge? 10. As regards first question for is concerned sections 22 (1) and 22(2) of the Act reads as under: "22(1) Subject to the provisions of sectioan 25 no person shall be admitted as a member of a society except the following, that is to say--- (a) an individual, who is competent to contract under the Indian Contract Act, 1872; (b) a firm, company or other body corporate constituted under any law for the time being in force, or a society registered under the Societies Registration Act, 1860; (c) a society registered, or deemed to be registered under this Act; (d) the State Govt., (e) a local authority; (f) a public trust registered or deemed to have been registered under Bombay Public Trusts Act, 1950; Provided that the provisions of clause (a) shall not apply to an individual seeking admission to a society exclusively formed for the benefit of students of a school or college; Provided further that subject to such terms and conditions as may be laid down by general or special order ( a firm or a company or other body corporate as constituted under any law for the time being in force) may be admitted as a member only of such society as may be prescribed." "22(2)(a) Every person seeking admission as a member of a society of such class as may be notified by the State Govt in the official gazette in this behalf, shall, if he is duly qualified for membership of such society under the provisions of this Act, the rules and byelaws of the society, be deemed to have become a member of such society on the date of receipt by the society of the appalication for admission made by such person. (b) Where such society refuses to accept the application for admission as a member, or the payment in respect of membership made by such person, such person may tender such application, together with payment in respect of membership, if necessary, to the Registrar, who shall, on receipt of the same, forthwith, forward them to the society concerned and thereupon such member shall be deemed to have become a member of such society on the date of receipt by the society of such application and the payment for the membership, if any, from the Registrar. (c) Where the society is of the opinion that such person is not qualified for being a member of the society or that he may not be continued as its member, such society may, within a period of three months from the date of receipt of his application for admission under clause (a), or, as the case may be, clause (b), move the Registrar by an application in writing stating all grounds in support thereof, for a declaration, that such person shall cease to be its member with effect from such date as may be specified by the Registrar, in such declaration. (d) On receipt of the application under clause (c), the Registrar shall after making such inquiry as he thinks fit and for reasons to be recorded in writing make an order either rejecting the application of the society or accepting the application of the society and declaring that such person shall cease to be its member with effect from such date as may be specified in such order; Provided that no order accepting the application of the society and making a declaration as aforesaid shall be made by the Registrar under this clause unless an opportunity of being heard is given to the person concerned. (e) The decision of the Registrar under clause (d) shalla be final and shall not be called in question in any court." Section 22(3) which is also relevant for the purpose of this petition reads as under: "22(3) Nothwithstanding anything contained in subsection (1) the State Govt, may, having regard to the fact that the interest of any person or class of persons engaged in or carrying on any profession, business or employment conflicts or is likely to conflict with the objects of any society or class of societies by general or special order published in the official gazette, declare that such class of persons shall be disqualified from being admitted, or for continuing, as member or members or shall be eligible for membership only to a limited extent, of any society or class of societies, so long as such person or persons are engaged in or carry on that profession, business or employment, as the case may be." 11. In view of the above, it is apparent that as per section 22(1)(a) any individual who is competent to contract under the Act can become member except a person seeking admission to a society exclusively formed for the benefit of students of a school or college and or the State Govt has made a declaration as per subsection 22(3) that such person or class of persons shall be disqualified from being admitted as members. Aforesaid are the only two restrictions provided by the first proviso of subsection 22(1) so far as the individual is concerned and his disqualification by way of declaration in the official gazette as per subsection 22(3) so far as clauses (a) to (f) are concerned. It is not the case of the petitioner that any disqualification has been made under subsection 22(3) by the State Govt qua the trustees to become members in