IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No 1446 of 2004 in SPECIAL CIVIL APPLICATIONNo 7302 of 2004 with CIVIL APPLICATION No 5783 of 2004 With LETTERS PATENT APPEAL NO 1447 OF 2004 In CIVIL APPLICATION NO 5467 OF 2004 with CIVIL APPLICATION No 5784 of 2004 For Approval and Signature: HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE D.A.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? Yes 2. To be referred to the Reporter or not? Yes : 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? No 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? No 5. Whether it is to be circulated to the concerned : YES Judge/Judges ? Yes -------------------------------------------------------------- MOTIBHAI R CHAUDHARY CHAIRMAN Versus REGISTRAR CO-OP SOCIETIES -------------------------------------------------------------- Appearance: 1. LETTERS PATENT APPEAL No. 1446 of 2004 MR. K.S. NANAVATI, LD. SR. COUNSEL FOR NANAVATI ASSOCIATES for Appellant MR PK JANI for Respondent No. 4-16 on Caveat 2. LETTERS PATENT APPEAL NO. 1447 of 2004 MR. MIHIR JOSHI FOR MR. S.N. THAKKAR FOR APPELLANT. MR PK JANI for Respondent No. 5-17 on Caveat -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE D.A.MEHTA Date of decision: 12/08/2004 COMMON ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE M.S.SHAH) When should a leader retire from the office : when others ask - "WHY ?" or when others ask "WHY NOT ?". The octogenarian leader of the dairy Co-operative movement in Mehsana District, who appears to have missed the significance of the above question, has moved this Court for challenging the order dated 20th July, 2004 by which the Learned Single Judge has restrained original respondent no.4 Shri. Motibhai R. Chaudhary (appellant in LPA No.1446 of 2004hereinafter referred to as "the appellant") from functioning as the Chairman of respondent no.3 Mehsana District Milk Producers Cooperative Federation Limited ( 'the Federal Society, for brevity) in view of the no-confidence motion passed against the appellant, as out of 15 members of the managing committee, 13 members have cast their vote in favour of the motion. The learned Single Judge has further clarified that the Vice Chairman or any other person holding the office as Incharge Chairman shall continue to function as Incharge Chairman till final disposal of the petition, with a further clarification that, he shall not take any policy decision and shall not incur any expenses exceeding Rs.2,500-00 unless expressly authorized by members of the managing committee at its meeting held in due course as required under the bye laws or otherwise. The learned Single Judge also granted liberty to the Federal Society and Iswarpura Milk Producers Cooperative Society Limited of village Mansa (a primary member of the Federal Societyappellant in LPA No.1447 of 2004 - hereinafter referred to as "Ishwarpura Primary Society") to move the court for modification of the above interim order in case the general body of the Society passes any resolution recalling any of the members of the managing committee or otherwise. 2. The above interlocutory order is passed in Special Civil Application No. 7302 of 2004 filed on 26-6-2004 by 13 members of the managing committee of the Federal Society seeking certain final and interim reliefs on the basis of the following facts, as averred in the petition, and subsequent developments. 2.1 The 13 petitioners are members of the managing committee of the Federal Society registered under the provisions of the Gujarat Cooperative Societies Act, 1961 (the 'Act' for brevity). The Society was established in the year 1960 by Shri Mansibhai Patel who spearheaded the cooperative movement in Mehsana district and encouraged farmers, more particularly small and marginal farmers, to rear cattle and encouraged cooperative movement in Mehsana district for production and distribution of milk. Shri Mansibhai Patel died in the year 1970. Thereafter appellant Shri Motibhai Chaudhary came to be elected as the Chairman of the Federal Society. The appellant is the respected leader of cooperative movement and all the 13 petitioners accept that the appellant had contributed to the cause of milk producers in Mehsana District. However the appellant suffered serious brain stroke about two years back at the age of 83 years. The appellant was taken to Bombay hospital for major brain surgery. Because of the serious impediment to his physical and mental abilities the appellant is not only unable to walk without somebody's help, but he has complete impediment in his speech. He is also unable to put identical signatures in the proper manner. He has also lost his memory and is unable to move properly. But on account of insistence of his family friends not to relinquish the office of Chairman, the appellant is continuing as such. 2.2 It is further stated that the Federal Society has large scale business with turn over of Rs.877.30 crores in the year ended on 31-3-2004, collected milk to the tune of 44 crore liters in that year, it has 1063 primary societies as its members who in turn have 4,78,965 individual members and the federal Society also has 1700 persons on its pay roll as direct employees. In view of the aforesaid magnitude of the business of the Federal Society the petitioners requested the appellant to relinquish the office of Chairman because of his aforesaid disabilities and to hand over the office to some other member of the managing committee. Since that request was not acceded to, the petitioners addressed letter dated 29-1-2004 and reminder dated 2-2-2004 to the Managing Director of the Federal Society (Annexure-A & B to the petition) circulating no confidence motion against the appellant and also sent the same to the District Registrar of Cooperative Societies, Mehsana. On 19-2-2004 by letter at Annexure-C the District Registrar enquired from the Managing Director of the Federal Society about the action taken on the requisition submitted by the petitioners. On 2-2-2004 the Managing Director informed one of the petitioners that he had sought legal opinion from a learned senior advocate who opined that the notice of no confidence motion is not maintainable and, therefore, nothing can be done in this regard (Annexure-D). Thereafter on 12-3-2004 the appellant proceeded on leave and handed over charge of the office of the Chairman to Shri. Vithalbhai Patel, Vice Chairman of the Federal Society who is petitioner no.10 in the petition. Shri. Vithalbhai Patel continued to discharge his duties as Incharge Chairman from 12-3-2004 to 19-6-2004. 2.3 The appellant however remained present at the Annual General Meeting of the Federal Society on 20-6-2004 and resumed duty as the Chairman. On the same day 11 out of 13 petitioners submitted a requisition (Annexure-G) for convening meeting of the managing committee to discuss the question of Chairman resuming duty inspite of his ill health and the 13 petitioners also purported to pass a resolution by circulation withdrawing the powers of the Chairman and Managing Director to make appointments, transfers, or to grant promotion of staff and specifically resolved that the Chairman shall not make appointment of any person without prior permission of the managing committee and that the Managing Director shall not consult any person appointed by the Chairman without the permission of the Managing Committee. Thereafter, on 21-6-2004 the appellant passed an office order (Annexure-I) appointing Shri Muljibhai Chaudhary as Assistant to the Chairman at a token honorarium of Rs.1-00. In the said order it was also stated that the Managing Director and the subordinate officers shall, in coordination with said Shri Muljibhai Chaudhary, submit necessary information to the Chairman. The said office order came to be challenged in Arbitration Suit No. 653 of 2003 before the Board of Nominees at Mehsana. On 23-6-2004 Board of Nominees granted ad-interim injunction against any such appointment of any person by the Chairman without the resolution of the Managing Committee. On 22-6-2004, 14 out of 15 members of the Managing Committee addressed a letter (Annexure-K) to the Managing Director moving a motion of no confidence against the appellant as Chairman of the Federal Society on the ground that the Chairman's ill-health and physical & mental incapacity to handle business and his inability to shoulder responsibilities as Chairman of the Federal Society has resulted into various difficulties in the administration of the Federal Society. 2.4. The petition giving rise to this appeal came to be filed on 25-6-2004 praying for various reliefs, mainly for directing the Federal Society (through the Managing Director) to call and convene special meeting of the Managing Committee for the purpose of considering the no confidence motion submitted by the petitioners (Annexure-K), and to direct the Registrar of Cooperative Societies, Mehsana to institute proceedings under section 76-B and also to issue appropriate direction under section 160 of the Act to remove the appellant from the office of Chairman considering the state of health of the appellant. 3.0 Subsequent developments after filing of the petition are as under:- 3.1 When the petition came up for hearing on 29-6-2004, the learned Single Judge passed the following order :- "Notice returnable on 14-7-2004. In the meantime, by way of ad-interim order, it is observed that it would be open to the petitioners to move the District Registrar for holding of the meeting for considering motion of no-confidence in presence of an officer who may be nominated by the District Registrar for holding of such meeting. However, it is further directed that in case such a motion is passed, the same shall not be implemented till further orders. Direct service is permitted. " 3.2 Pursuant to the aforesaid ad-interim order dated 29-6-2004 the District Registrar passed an order dated 5-7-2004 convening meeting of the managing committee on 12-7-2004 for considering the no confidence motion against the Chairman. Special Civil Application No. 8112 of 2004 filed by the Federal Society for challenging the District Registrar's abovesaid notice dated 5-7-2004 came to be disposed of with permission granted to raise appropriate defence in the pending petition for the purpose of challenging the said notice of the District Registrar. 3.3 At the meeting of the managing committee held on 12-7-2004 the no confidence motion was passed against the appellant herein by a majority 13 votes and none against the motion. 3.4 On 16-7-2004 the learned Single Judge passed an order recording that hearing of the petition had commenced and that learned counsel for respondent no.4 (appellant herein) had made a statement on 14-7-2004 that his client shall not attend the office and shall not take any policy decision. The learned Single Judge ordered the same arrangement to continue till 20th July, 2004 when the order under appeal came to be passed. 3.5 To complete the record, the ad-interim order dated 29-6-2004 of the learned Single Judge (quoted in para 3.1 above) came to be challenged in Letters Patent Appeal No. 1403 of 2004. The appeal was disposed of on 16-7-2004 recording the intervening developments and directing that if the learned Single Judge passes any order adverse to the appellant herein, the same shall not be implemented for a fortnight. That direction has been quashed by the Hon'ble Supreme Court by order dated 2-8-2004 in SLP (C) No. 4665 of 2004 filed by the original petitioners (13 members of the managing committee). 4. After hearing the learned counsel for the parties at length, including the learned counsel for Iswarpura Primary Society, on 20-7-2004 the learned Single Judge admitted the petition, joined the said Iswarpura Primary Society as a party respondent in the main petition and passed the order granting interim relief which is under challenge in these appeals. The said order dated 20.7.2004 is operating since 2.8.2004. 5. At the hearing of the appeals, learned senior counsel Mr. K.S. Nanavati for the appellant (original respondent no.4) has raised the following contentions:- 5.1 The interim order passed by Learned Single Judge amounts to allowing the petition before the matter is finally decided on merits. The original petitioners do not have such a strong case nor do extraordinary circumstances exist which would justify such an interim order; 5.2 The order dated 5-7-2004 of the District Registrar calling / convening meeting of the Managing Committee for considering the no confidence motion is illegal and without any authority of law; 5.3 The dispute between the petitioners and the appellant touches the business of the Federal Society and, therefore, the remedy available to the petitioners is under section 96 of the Gujarat Cooperative Societies Act and not a writ petition; 5.4 The Managing Committee has no power to remove the elected Chairman on the ground of loss of confidence, as under the Gujarat Cooperative Societies Act and the Rules framed thereunder or bye laws of the Federal Society, no such power is conferred on the managing committee to remove the elected Chairman by passing such no confidence motion. Various authorities have been cited in support of the aforesaid proposition. 5.5 Even if there is any such power, the same procedure is required to be followed which is prescribed for electing the Chairman as prescribed under Section 145-Z of the Act but no such procedure is followed in the instant case. Hence, the resolution is illegal. 6. Mr. Mihir Joshi, learned counsel for the Iswarpura Primary Society (one of the 1067 primary cooperative societies which are members of the Federal Society) has submitted that a large number of members have requisitioned an extraordinary general meeting of the general body of the Federal Society to express their confidence in Shri Motibhai Chaudhary as Chairman and to remove the 13 petitioners as members of the managing committee. Hence till such meeting is held, Shri Motibhai Chaudhary can not be restrained from acting as the Chairman of the Federal Society. 7. Contention No.1: As far as the first contention is concerned, it was also urged before the Learned Single Judge, and Learned Single Judge has relied on the decision of the Apex Court in Deoraj Vs. State of Maharashtra, AIR 2004 SC 1975 = 2004 (4) SCC 697, holding that availability of a very strong prima facie case of a standard much higher than just prima facie case, the consideration of balance of convenience and irreparable injury forcefully tilting the balance of case totally in favour of the applicant may persuade the court for granting interim relief though it amounts to granting the final relief. The court would grant such an interim relief only if satisfied that withholding of it would prick the conscience of the court and do violence to the sense of justice resulting into injustice being perpetuated through the hearing. The learned Single Judge held that in order to uphold the democratic principles, respondent no.4 in the petition who has lost majority should not be allowed to continue to hold the office of Chairman. 8. Since this issue touches both the question of strong prima facie case and also the question of balance of convenience, we, now deal with the submissions made by the learned counsel for the parties on the other contentions and shall then revert back to this contention. 9. Contention No.2: It was contended by Mr. Nanavati, learned senior counsel for the appellant that the District Registrar of Cooperative Societies has no power under the provisions of the Act and the Rules to convene any meeting of the Managing Committee of the Federal Society. Our attention is invited to the provisions of Section 76-B, Section 82(2) and sub sections (1) and (2) of Section 160 of the Act which read as under. 76B. Removal of officer. - (1) If, in the opinion of the Registrar, any officer makes persistent default or is negligent in performance of the duties imposed on him by this Act or the rules or the bye-laws or does anything which is prejudicial to the interests of the Society or where he stands disqualified by or under this Act, the Registrar may, after giving the officer an opportunity of being heard, by order remove such officer and direct the Society to elect or appoint a person or a qualified member in the vacancy caused by such removal and the officer so elected or appointed shall hold office so long only as the officer in whose place he is elected or appointed would have held if the vacancy had not occurred. (2) The Registrar may, by order, direct that the officer so removed shall be disqualified to hold or to contest election for any office in the society from which he is removed and in any other society for a period not exceeding four years from the date of the order and such officer may stand disqualified accordingly." Section 82 confers upon the Registrar of Co-operative Societies power to enforce performance of the obligations of the Society including the obligations under sub-section (1) to keep the prescribed books of accounts and to furnish the requisite statement and returns and records to the Registrar. Sub-section (2) of Section 82 further reads as under:- "(2) Where any society is required to take any action under this Act, the rules or the bye-laws, or in compliance with an order made under sub-section (1) and such action is not taken - (a) within the time provided in this Act, the rules or the bye-laws, or the order, as the case may be, or (b) where no time is so provided, within such time, having regard to the nature and extent of the action to the taken, as the Registrar may specify by notice in writing, the Registrar may himself, or through a person authorized by him, take such action, at the expense of the society; and such expense shall be recoverable from the society as if it were an arrear of land revenue." Section 160 of the Act reads as under :- 160. Registrar's power to give direction. - (1) If the Registrar of his own motion or otherwise is satisfied that in public interest or for the purposes of securing the proper implementation of co-operative production and other development programmes approved or undertaken by the State Government or for linking and coordinating of co-operative activities such as marketing and credit or securing the proper management of the business of the society generally or preventing the affairs of the society being conducted in a manner detrimental to the interests of the members, or of the depositors or the creditors thereof, it is necessary to issue directions to any class of societies generally or to any society or societies in particular, he may issue directions to them, from time to time, and all societies or the society concerned, as the case may be, shall be bound to comply with such directions. (2) The Registrar may of his own motion or otherwise modify or cancel any directions issued under sub-section (1), and in modifying or cancelling such directions he may impose such conditions as he may deem fit. [ emphasis supplied ] 10. In the instant case the District Registrar has not passed any order removing the Chairman under section 76-B of the Act. However, sub section (1) of section 160 does empower the District Registrar to issue directions to a society for the purpose of proper management of the business of the society and to prevent the affairs of the society conducted in a manner detrimental to the interest of the members. The society concerned is bound to comply with such directions. The Registrar is also empowered to issue such directions if he is satisfied that in public interest it is necessary to do so. 11. As pointed out by the original petitioners, respondent no.3 Federal Society is the largest milk producers society in Asia and had turnover of Rs.877 crores last year. It collected 44 crores liters of milk from 1063 primary societies with total membership of almost 4,80,000 members and 1700 employees. When the petitioners who are 13 out of 15 members of the managing committee requisitioned the Managing Director to convene meeting of the managing committee for considering no confidence motion against the Chairman on the ground of physical and mental incapacity of the Chairman to discharge the onerous duties of the office of Chairman of such a large Federal Society, the said requisition was not accepted by the Managing Director on the ground that such a motion of no confidence was not maintainable. The learned Single Judge, therefore, rightly permitted the petitioners to make a representation to the District Registrar to exercise his powers. We do not think that upon receiving such representation the District Registrar committed any illegality in convening meeting of the Managing Committee for considering the aforesaid motion of no confidence, when 13 elected members out of total 15 members of the Managing Committee of such a large Federal Society expressed their view that the management of the Federal Society cannot be properly carried on by the Chairman on account of his physical and mental incapacity to properly conduct the business of the society. The District Registrar was justified in exercising his power of issuing directions under sub section (1) of section 160 of the Act requiring the meeting of the Managing Committee to be convened for considering the motion of no confidence. 12. At this stage we may note the submissions made on behalf of the respondents herein, i.e. the original petitioners that the affairs of the Federal Society are being looked after by Managing Director under the supervision of the Chairman and that Chairman is not a mere titular head of the Federal Society. Bye law No. 44 of the Federal Society's Bye Laws reads as under:- " Chairman shall exercise general control over all the affairs of the Federal Society. In case the Chairman is on leave or out of station or cannot remain present for a long period, the Vice Chairman shall act as the Chairman and shall perform the day to day functions, otherwise he (the Vice Chairman) will be a member of the Managing Committee". [ emphasis supplied ] It is the case of the original petitioners that since the Chairman himself is unable to function on account of his old age and ill health, a person purportedly appointed as assistant to the Chairman was given access to all the files and the business of the Federal Society was sought to be run by certain persons who are not members of the Managing Committee but who were acting through the assistant to the Chairman as their proxy and the affairs of the society were not permitted to be run by the elected Managing Committee of the Federal Society but by such extra-legal functionaries. 13. The contention urged on behalf of the appellants is that the Registrar could have at the most under sub-section (2) of Section 82 of the Act required the Managing Director of the Federal Society to convene a meeting and if the Managing Director had failed to convene the meeting then only the Registrar could have given a direction under sub-section (2) of Section 82, assuming that any such power was available with the Managing committee to pass a motion of no confidence against the Chairman. In our view, when the Managing Director of the Federal Society had already informed the petitioners by letter dated 2.2.2004 that such a notice of no confidence motion is not maintainable, it was not necessary for the District Registrar to undertake the formality of addressing a letter to the Managing Director to convene a meeting and then to wait for its non-compliance before exercising the powers under sub-section (2) of Section 82 when under sub-section (1) of Section 160 already the situation warranted in public interest that a meeting of the managing committee of the Federal Society be convened immediately. So also, the contention that the District Registrar misconstrued the ad-interim order dated 29.6.2004 of this Court as a mandate and that the District Registrar's order dated 5.7.2004 does not indicate his own volition is mere hairsplitting on the part of the appellants to