LPA No. 215 of 2007 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of Decision: 27.08.2010 1. LPA No. 215 of 2007 (O&M) Capt. A.K.Mahindra and others Vs. State of Haryana and others 2. LPA No. 216 of 2007 (O&M) Suman Kumar and others Vs. State of Haryana and others CORAM: HON'BLE MR. JUSTICE MUKUL MUDGAL, CHIEF JUSTICE HON'BLE MR. JUSTICE AJAY TEWARI 1.Whether Reporters of local papers may be allowed to see the judgment ? 2.Whether to be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest? Present : Mr. Chetan Mittal, Sr. Advocate with Mr. Amit Jhanji, Advocate, for the petitioners. Mr. Randhir Singh, Addl. A.G. Haryana. Mr. J.K.Sibal, Sr. Advocate with Mr. Adarsh Jain, Advocate. Mr. D.V.Sharma, Sr. Advocate with Mr. Harit Sharma, Advocate. *** MUKUL MUDGAL, CHIEF JUSTICE 1. This Judgment shall dispose of LPA Nos. 215 and 216 of 2007 as they arise from the common Judgment dated 24.8.2007 [ LPA No. 215 of 2007 delivered by the learned Single Judge in W.P. Nos. 6491/2005 and 7742/2005. For the sake of convenience, facts are being taken from LPA No.215 of 2007. 2. The Appellants are 38 members (plus 9 in LPA No.216 of 2007) of the Mount Everest Co-operative House Building Society Limited (which contained in all approximately 300 members). The Respondents are 7 in number, inter alia comprising of:- (i) the State of Haryana (Respondent No.1) (ii) the Registrar, Co-operative Societies, Haryana (Respondent No.2) (iii) Mount Everest Co-operative House Building Society Limited (Respondent No.3) (iv) the Assistant Registrar, Co-operative Societies, Gurgaon, Haryana (Respondent No. 4) (v) Mr. Ashok Sharma (Respondent No.5) (vi) the Deputy Registrar, Co-operative Societies, Gurgaon, Haryana (Respondent No.6) (vii) Vipul Infrastructure Developers Pvt. Ltd. (Respondent No.7) 3. In 1995-96 the Mount Everest Cooperative House Building Society Limited purchased approximately 10 acres 4 kanals 14 marla of land in Village Wazirabad and Hyderpur for building flats for its members. The money spent on this purchase, i.e. Rs.2.62 crores, was sourced from the funds contributed by the members of the Society. 4. That certain irregularities had crept into the functioning of the society and its accounts, resulting in embezzlement of funds by [ LPA No. 215 of 2007 the then Committee members. A general Body meeting was held on 28.5.2000 and a new Managing Committee was elected. Thereafter, the accounts of the Society were gone into by an Internal Committee as well as the Cooperative Department. The audit report prepared by the Special Auditors was discussed by the new Managing Committee in its meeting in May, 2002, whereby it was decided to place the audit report before all the members so as to bring to their notice the prevalent conditions and further a decision was taken to lodge an FIR against the members of the erstwhile Managing Committee. Pursuant to the decision taken by the Managing Committee, an FIR No. 170 of 2002, was registered against the erstwhile Managing Committee Members, with Police Station, DLF, Gurgaon. Subsequently, the Police carried out investigations, made number of arrests and also filed charge sheets in Criminal Courts at Gurgaon. 5. A special General Body Meeting of the Society was held on 2.6.2002, in which the affairs and condition of the Society were discussed. In the meeting, keeping in mind the large scale and glaring misappropriation of funds between 1994 and 2000, it was resolved that the only option left before the Society was to sell the land at the best possible market price and to refund the contributions made by the members. The General Body of the Society decided to sell off the land for the following reasons recorded in the minutes:- “c) Factual land position:- With the help of the chart showing our land given by Mr. R.P.Gupta, the then Hony. Secretary in the M.C meeting held on 9th December 2000 the Hony. Secretary brought out the following :- [ LPA No. 215 of 2007 i) That 10.69 acres of land marked in red (Khasra Nos.1692, 1997, 1696, 1677, 1678 & 1679) stands registered and mutated in the name of the Society. This land is in the possession of the society. However out of this land around 9 acres (3.5 acres in khasra nos.1977, 1678 and 1679 and 5.5 acres in khasra nos.1692, 1696 and 1697) is under dispute/litigation in the Distt. Court, Gurgaon. This the clear land with the society is around 1.69 acres. ii) That we were given to understand by Mr. R.P.Gupta that around 4.5 acres of land marked in yellow colour (in khasra nos.1677, 1678, 1679, 1695, 1694, 1696, 1698, 21, 20 & 27) is under dispute/litigation. It now transpired that the land in khasra nos.1977, 1678, 1679, measuring around 3.5 acres was never purchased by us and there is no dispute/litigation going on with us i.e this land was never ours. Thus out of the total land measuring 4.5 acres said to be in dispute only around 1.1 acres in different khasra nos. is in dispute/cases are going on in the District Courts, Gurgaon. We learn that this land has been purchased by Saraswati Kunj and registration is in progress. It has been possible to establish these facts after checking/verifying various records with the revenue dept. with help from the patwari/Tehsildar and the advocate, all of whom we met a number of times. iii) We are given to understand that a few days ago our land has been surveyed by the Govt. along with other vacant land with a view to acquire it i.e the acquisition process has been set in motion. iv) By purchasing vacant land around us Sarswati Kunj has practically surrounded/Encircled us. v) That our land marked in red is divided in two parts and is irregular in shape. d) Future course of action open to us : i) The Hony, Secretary brought out that the following courses of action are available to us :- i) Collaboration : Out of the two parties who responded to the tenders one namely M/S Antriksh Engrs & Const. Corporation have shown as interest. Their main terms are as follows :- a) That they will invest all money required to obtain CLU, development charges etc., i.e they will invest right upto the stage where construction can begin. This will entail an expenditure of Rs.8 crores approx. b) That they will refund the deposit of a limited no. of members after C.L.U permission is received. c) That in lieu of the money invested they will be given 50% of FAR, and [ LPA No. 215 of 2007 d) Construction rate would be Rs.850/- sq. ft. which is deductible. The advantage is that we will be able to move forward in achieving our aim and that limited number of members desirous of leaving will get their money back. Against this the disadvantages are that it will take around six months to get CLU permission by which time Section 4 notice may be issued. It will take a minimum period of three years from the time construction commences before we reach completion if all goes smoothly. A sixteen hundred sq. ft. flat would cost Rs.13.60 lacs approx. Assuming a member had paid Rs.4.0 lacs the flat would cost him Rs.17.50. Against this flats are readily available in Gurgaon (Jal Vayu Vihar and Rail Apts) for Rs.12 to 13 lacs. ii) Sale of land : We are aware that the land prices have gone down, vis.a.vis our purported purchase price, in the last few years. Thus if we sell the land we will be unable to recover the full amount. However, the advantages are :- i) Will avert the danger of the land being acquired. ii) Will avert all the cost and uncertainties of the litigations is being faced. iii) Members will get back around 70% of their investments. iv) Will pave the way to recover the balance amount of investments by members.” 6. In the meeting of the General Body of the Society on 2.6.2002, it was therefore decided to dispose of the land of the Society. Ashok Kumar, Treasurer and Capt. A.K. Mahindra, the Appellant No.1 in LPA No. 215/2007, the then acting Honorary Secretary, were authorized to initiate the proceedings for disposal of the land. They by their letter dated 2.7.2002, sought permission from Registrar, Cooperative Societies, Respondent No.2, to sell the land. In the meanwhile, for the purpose of ascertaining the correct market rate of the land, Capt. A.K. Mahindra himself wrote a letter (Annexure R- 7/1) to the Tehsildar, Gurgaon. In reply, the Tehsildar, Gurgaon quoted the market rate to be Rs.40 lacs per acre, by way of [ LPA No. 215 of 2007 Endorsement dated 14.6.2002. Subsequently, after satisfying himself about the market rate of the land, the Appellant Capt. A.K. Mahindra wrote a letter to the Registrar, Cooperative Societies, Haryana by the letter dated 2.7.2002 (Annexure R-7/2), seeking permission to dispose of the land at the earliest for an amount of Rs.4.2 crores. The contents of the aforesaid letter dated 2.7.2002 written by Capt. A.K. Mahindra are as follows: “To The Asstt. Registrar, Cooperative Societies Gurgaon, Haryana Sub : Permission for disposal/sale of society land. Sir, With reference to the letter No.2298 dated 1.7.02 received from the office of the Dy. Registrar, Gurgaon, we are enclosing the u/m documents :- (a) Summary of the land as per registers and jamabandi submitted is enclosed as desired. As per this summary the total land with the society is 84 kanals 4 marlas, and (b) Rate of land in the area where the society land is situated is Rs.40 lakhs (Rs. Forty lakhs) per acre as obtained from the concerned patwaris office. A photo copy of this letter is enclosed. As per this the total value of land is Rs.4.20 crores (Rs. Four crores twenty lakhs only). Kindly grant us the necessary permission to dispose off the land at the earliest and oblige. Thanking you, Sd/- A.K.Mahindra, Hony. Secretary, Mt. Everest Coop. Grop. Housing Societies Ltd.” 7. The Registrar, Cooperative Societies, on 13.12.2002, in the meanwhile passed a suspension order under Section 34(2) of the Haryana Cooperative Societies Act, 1984, thereby suspending the new Managing Committee of the Society based on allegations of [ LPA No. 215 of 2007 gross and serious irregularities and appointed a Board of Administrators. 8. On 14.1.2003 the Registrar, Cooperative Societies, granted permission to dispose of the Society’s land and the Deputy Registrar, Cooperative Societies, Gurgaon, formed a Sales Committee of 5 members for selling the same. While granting permission for sale, Respondent No.2 thus appointed the following Sales Committee of 5 members, comprising inter alia of:- (i) Dy. Registrar, Cooperative Societies, Gurgaon (ii) Inspector, Cooperative Societies, Gurgaon (iii) Sub-Inspector, Cooperative Societies, Gurgaon 9. In the meanwhile CWP No. 20252 of 2003 was filed by A.K. Mahindra and others, challenging the order of suspension of the new Managing Committee as well as the order granting permission to sell the land. During the pendency of the said Writ Petition, Assistant Registrar, Cooperative Societies, Gurgaon on 5.9.2003 removed the new Managing Committee under Section 34(1) of the Haryana State Cooperative Societies Act, 1984, based on the ground that the aforesaid Committee had failed to perform its duties as provided under the Act, Rules and bye-Laws. 10. On 7.8.2003 a public notice for auction of the land of the society, to be held on 21.8.2003, was issued in all the specified newspapers, i.e. The Tribune (English and Hindi), Amar Ujala (Hindi), Dainik Bhaskar (Hindi) and Dainik Jagran (Hindi). On 18.8.2003, i.e. 3 days prior to auction, an application in the Court of [ LPA No. 215 of 2007 Senior Sub-Judge was moved for restraining the Society from holding the auction on 21.8.2003. On their application, the Sub-Judge’s Court granted a stay of the sale of land. Therefore, on 20.8.2003 an advertisement in newspapers was issued for the postponement of the proposed auction. Thereafter, after the vacation of the interim order of the Sub-Judge, another advertisement was issued, which was published in “The Tribune”. Wherein, while referring to earlier advertisement dated 7.8.2003, a fresh date of auction was given as 24.11.2003 at 10.00 a.m. at the Society site. On 24.11.2003 the auction was carried out, whereby the land was sold to Vipul Infrastructure Developers Private Limited (Respondent No.7) for Rs. 4,94,04,125 as against the estimated market rate of about Rs.4.2 crores. 11. After auction of the land in favour of Respondent No.7, Writ Petition No.20252 of 2003 was withdrawn by the Petitioners therein, with the liberty to avail all existing and alternate remedies available to them, by filing an appeal under Section 114 of the Act. The Petitioner availed of the remedy under Section 114 by filing the appeal which was dismissed by the Deputy Registrar on 19.11.2004, hence the Writ Petition No. 6491/2005 out of which the present LPA No.215/2007 has arisen, was filed. 12. The Single Judge inter alia held as follows:- (i) That the challenge to the suspension Order dated 13.12.2002 and removal order dated 5.9.2003 of the erstwhile Committee did not subsist because new election of the Managing Committee had been held on 5.12.2004 and Appellant No.1, [ LPA No. 215 of 2007 Capt. A.K. Mahindra was also inducted as a member. The Writ Petition filed earlier was dismissed as infructuous. Therefore, on confirmation of the new Managing Committee the orders of suspension and removal of the earlier Managing Committee, challenged by the Writ Petitioner did not survive (ii) That the plea taken by the Writ Petitioner that neither any notice to the members of the Society was issued nor any opportunity of hearing was afforded, nor any proceeding under Section 34(10) of the Act for removal of Committee were pending when the suspension order was passed, was also held to be not sustainable on the ground that suspension is only an intermediary step necessitated in the interest of Cooperative Society when the authorities are satisfied (iii) That the erstwhile Managing Committee did not respond to show-cause notice regarding allegations, contained in the suspension order. Therefore the order of removal on the ground of non-performance of statutory duty tantamount to application of mind by the competent authority before passing the impugned orders (iv) That there was no illegality or perversity in the impugned orders which were passed in the interest of members of the society, who had fallen prey to the evil design of the members of the Managing Committee (v) That since the earlier Writ Petition was filed by A.K. Mahindra and not by any other members, therefore other Petitioners except A.K. Mahindra, had no locus to challenge the order of removal or sale. (vi) That in appeal filed before the Registrar, no challenge to the order of Registrar giving permission to sell/auction was made, nor the auction purchaser was impleaded as a party, therefore the appeal, being bad for misjoinder of necessary party and non-appealing of impugned order, debars the petitioners to challenge the same in the Writ Petition (vii) That the decision to sell the land was of the General Body of the Society, taken on 2.6.2002 and that the Society is not under the control or managed by the State, but by a Managing [ LPA No. 215 of 2007 Committee of elected members. Therefore that decision cannot be said to be taken by an authority constituted under the Act (viii) That the members of the Society had decided to dispose of the land at reasonable price and authorized Ashok Kumar and A.K. Mahindra to act in the matter and that A.K. Mahindra, vide Annexure R-7/1, assessed the market value of the land as Rs.40 lacs per acre on the basis of information obtained from concerned Patwari (ix) That sale was conducted after due permission granted by the Registrar by a Sales Committee and after giving advertisement in 3 popular newspapers of Hindi and English, before fixing the minimum rate of land at Rs.40 lacs per acre, which was the market rate at that time. Petitioner did not bring on record any document to show that rate of land was more than Rs.40 lacs per acre. The prevalent collector rate of that time was Rs.12 lacs per acre in the area, whereas, Society’s land in question was sold at Rs.46.25 lacs per acre, i.e. more than market rate fixed at Rs.40 lacs per acre. Therefore there was neither any fraud nor was the sale bad. (x) That publication in the less expensive newspapers to publicize, was taken by the Society itself (xi) That the single Judge enhanced the rate of land from Rs.46.25 lacs to Rs.70 lacs per acre, which amount A.K. Mahindra had himself offered 13. The learned Single Judge, after hearing the parties at length, disposed of the Writ Petition, taking into account the interest of the members of the Society, holding that the amount of Rs.70 lacs per acre was sufficient for eligible members. The learned Single Judge further ordered that the difference of the amount which had come about with the increase in the cost of the land, as ordered by the learned Single Judge by increasing the rate from Rs.46.25 lacs per acre to Rs.70 lacs per acre, would be paid by Respondent No.7 to the [ LPA No. 215 of 2007 Registrar, Cooperative Societies, within 45 days from the date of order, i.e. 24.8.2007, with interest at the rate of 6% per annum on the amount awarded by him from the date of auction till the payment was actually made. It was further directed that amount so received from Respondent No.7 would be disbursed forthwith amongst the eligible members proportionately, except the tainted ones, by the Registrar himself, or by any other person authorized by him in that regard; and the share of the tainted members to be kept until the decision of the cases against them and be adjusted against the recovery, if any ordered against them. It was also made clear by the learned Single Judge that the members who had already received their share amount would only be entitled to the difference on account of increase of price and the concession given by the Court in the Judgment. 14. The first plea raised by learned counsel for Appellant is that the advertisement for auction of the land was not published in newspapers which had a wide circulation in that area. It was further argued that the said notice was deliberately issued in a newspaper which had negligible circulation in Delhi and Gurgaon, where most of the members of the Society used to reside. This argument raised by the counsel is not sustainable because the learned Single Judge has rightly recorded a finding in this regard that the Society had itself given in writing to the authorities to publicize the auction notice in less expensive but popular newspaper, keeping in mind the paucity of funds. Therefore, at this stage, it cannot be contended that wide publicity was not given. Furthermore, the first advertisements were given in 3 newspapers and the second one announcing the new date [ LPA No. 215 of 2007 occasioned by the interim order was published in The Tribune, which is locally the most prominent newspaper in Punjab and Haryana. The land being situated in Haryana the publishing of the later advertisement in The Tribune can not be said to cause prejudice as averred by the Appellant. 15. Learned counsel appearing for the Appellant laid much stress on the issue that the land was sold for a song to Respondent No.7, though it could have fetched more sale consideration in case the auction after giving due advertisement, would have been conducted. This plea on behalf of the Appellant is not sustainable, because Capt. A.K. Mahindra, the Appellant No.1 in LPA No.215/2007, had himself written a letter on 2.7.2002 while seeking permission to sell the land, to the Assistant Registrar, Cooperative Societies, by stating that the rate of the land in area where the Society is situated is Rs.40 lacs per acre, as obtained from the concerned Patwari Office. He had also forwarded with that letter, a copy of letter received from the concerned Patwari Office. In that letter he had himself stated that the total value of the land was based on the above rate which amounted to Rs.4.20 crores for the entire land of the Society. Even the minutes of the General Body meeting go to show that the members themselves had resolved that the land prices in the area had gone down. In view of the rate quoted by the Appellant himself in the aforementioned letter and decision taken to sell the land by General Body in its meeting on the ground that the land prices were going down, no plea on his behalf could be raised at this stage to say that land was sold at a lower price. Otherwise also, the learned Single Judge enhanced the [ LPA No. 215 of 2007 rate from 40 lacs to 70 lacs per acre. Besides, when the General Body of the Society had decided to abort the venture of flat building due to germane factors such as the pending litigation, possibility of acquisition by the Government, irregular shape of the land and the surrounding land having been purchased by Saraswati Kunj and falling land prices, it was in the members’ interest to recover the investments made by them in the failed venture as quickly as possible. The Appellant No.1 had made enquiries from the Tehsildar about the prevalent market prices and the Tehsildar had opined that at the relevant time while the Collector rate was Rs.12 lacs per acre, the market rate was about Rs.40 lacs per acre. As against this the learned Single Judge has awarded Rs.70 lacs per acre. The Appellant No.1 who had himself as an office bearer sought permission to sell the land at Rs.40 lacs per acre, can not therefore question the inadequacy of Rs.70 lacs per acre awarded by the Learned Single Judge. 16. As far as the plea raised by the counsel for the Appellant that there was no necessity of selling the land, is concerned; it is worth mentioning that in the General Body meeting a decision taken to sell the land was taken keeping in mind the plight of the members who were initially made to understand that a flat would cost around Rs.4 lacs, but later on it was stipulated that on completion the flat would cost Rs.17.50 lacs approximately, if construction commenced on time and was completed within 3 years, whereas at that time, in other adjoining societies flats were readily available for Rs.12-13 lacs. [ LPA No. 215 of 2007 17. The amount which was actually paid for the purchase of the land on 24.11.2003 exceeded by about Rs.70 lacs, what was previously estimated to be the market rate, i.e. Rs.4.2 crores, by the letter dated 2.7.2002 (Annexure R-7/2) written by the Appellant No.1 Capt. A.K. Mahindra on behalf of the Society to the Registrar, Cooperative Societies, Haryana. 18. While there are some minor procedural irregularities in the sale of the property, we are satisfied that these have not affected the price fetched. Significantly the Appellant No.1 had himself, as an office bearer, sought permission to effect the sale at Rs.4.2 crores in July, 2002 and this property was eventually sold at Rs.4.94 crores in November, 2003 inspite of the General Body of the Society having noted the fall in land prices. Even thereafter the Appellant No.1 offered to have the property sold at the rate of Rs.70 lakh per acre. The Single Judge in our view has rightly ordered that payment to the Society and its members be made at Rs.70 lacs per acre, a figure suggested by the Appellant No.1 himself and the Appellant cannot be heard to term the said figure as low. Undoubtedly some of the pleas of the Appellant regarding the procedure and the speed at which the transaction went through could have had substance had it affected the best price available