IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No 2193 of 2005 For Approval and Signature: HON'BLE MR.JUSTICE K.M.MEHTA ============================================================ 1. Whether Reporters of Local Papers may be allowed : to see the judgements? 2. To be referred to the Reporter or not? : NO 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 concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- GUJARAT STATE CO OP BANK LTD.THRO. CHIEF EXECUTIVE OFFICER Versus CHANDRAKANT DAHYABHAI PATEL -------------------------------------------------------------- Appearance: 1. Special Civil Application No. 2193 of 2005 MR HARIN P RAVAL for Petitioner No. 1 MR AR THACKER for Respondent No. 1 MR AD OZA GOVERNMENT PLEADER for respondent No.3 MR KB TRIVEDI ADDI.ADVOCATE GENERAL with MS SANGEETA VISHEN ASST.GOVERNMENT PLEADER for Respondent No.2 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE K.M.MEHTA Date of decision: /05/2005 CAV JUDGEMENT 1. Rule. Learned advocate Mr.A.R.Thacker, waives service of notice of rule on behalf of respondent No.1. Mr.A.D.Oza, learned Government Pleader waives service of notice of rule on behalf of respondent No.3. Ms.Sangeet Vishen, learned AGp waives service of notice of rule on behalf of respondent No.2. 1.1 Gujarat State Cooperative Bank Ltd., petitioner has filed this petition with a prayer that this Court may be pleased to issue appropriate writ, order or direction in the nature of prohibition or mandamus, quashing and setting aside the impugned ex parte order dated 16th February 2005 passed by the Registrar's Board of Nominees, Ahmedabad Division, Ahmedabad below application Exh.5 in Lavad Suit No.170 of 2005. By the impugned order, the Board of Nominees has granted prayer contained in paragraph 8(A) of the Injunction Application filed by one Mr.Chandrakant Dahyabhai Patel, respondent No.1 herein. Respondent No.1 by his application has prayed that the election of the Chairman and Vice Chairman to be held in the meeting dated 16th February 2005 may not be continued because the petitioner and others have right to vote in this behalf and till that is decided, the said meeting will not be held and prayed to restrain respondents viz. The Election Officer & City Deputy Collector & Gujarat State Cooperative Bank Ltd. not to hold the meeting in this behalf. The petitioner has also prayed that this Court may be pleased to quash and set aside the impugned decision of respondent No.2, the Election Officer & City Deputy Collector dated 16th February 2005 as communicated through messenger at 12.10 hours on 16th February 2005. It is also prayed that direction may be given to respondent No.2 to convene the meeting of the Board of Directors of the petitioner-bank forthwith for the purpose of election of the Chairman and Vice Chairman from amongst the newly constituted Board of Directors of the petitioner-bank. FACTS GIVING RAISE TO THIS PETITION:- 2. The fact giving raise to this petition are as under: 2.1 The petitioner is an Apex Cooperative Bank as provided for in Schedule appended to the Gujarat Cooperative Societies Act, 1961 (the Act for short) and is a specified cooperative society as provided under Section 74C of the said Act. On 13/14 March 2001, the first meeting of the newly elected members of the Managing Committee of the petitioner society held under Section 145-Z(2) of the Act for holding elections of the Chairman and Vice Chairman held. Under Section 74-C(2) of the Act, the term of the members of the Managing Committee is three years from the date of holding of the first meeting. 2.2 It is the case of the petitioner that the Executive Committee of the petitioner vide resolution No.16-B(2) in its meeting dated 24th January 2004 passed a resolution resolving to return back the share capital of Rs.2,56,45,000/- (Rupees Two Crore Fifty Six Lacs Forty Five Thousand Only) subscribed by the State Government during the period of last 29-40 years. The Executive committee of the Board of Directors of the Bank took a decision to leave the Government guarantees in respect of all lands, loans of whatsoever nature extended by the State Government somewhere on 24th January 2004. In pursuance of the resolution of the Executive Committee of the Board of Directors of the petitioner Bank, above referred to the share capital returned back to the State Government somewhere on 4th February 2004. The election of the Board of Directors was required to be held and Election Officer and City Deputy Collector, Ahmedabad published election notice under Rule 6 of the Gujarat Specified Cooperative Societies Election to Committees Rules, 1982 for the purpose of preparation of list of voters vide publication of advertisement in Sandesh daily newspaper dated 2nd February 2004. 2.3 The Government of Gujarat in purported exercise of power under Section 161 of the Act exempted the specified cooperative societies falling under the categories mentioned in Section 74C from holding the election of the executive committees of such societies which were required to hold the elections of the executive committee under the provisions of Section 74-C read with Section 145A to L on or before 30th June 2004. On the basis of the said order, respondent No.2 herein postponed the process of holding the elections of the Board of Directors of the petitioner society by his order dated 4th February 2004. The term of the members of the managing committee of the petitioner bank was to expire somewhere on 13th March 2004 and in accordance with provisions of Section 145-D, (which provide conduct of Elections) the elections were required to be held one month before the date on which term of the managing committee was due to expire. The Annual General Meeting of the petitioner bank vide resolution No.10 dated 3rd May 2004 proposed amendment to byelaw o.26-G along with amendment to various other byelaws. 2.4 Being aggrieved and dissatisfied with the said action, the petitioner had challenged the said action of the Election Officer in postponing the election and also for a declaration that the notification dated 4th February 2004, granting exemption to all the cooperative societies from holding the elections to the managing committee till 30th June 2004 by filing Special Civil Application No.2705 of 2004 before this Court. This Court (Coram: Jayant Patel, J.) by order dated 10th August 2004, by giving certain directions disposed of the matter. Respondents Nos.2 and 3 (i.e. Government authorities in this matter) were directed to initiate the process and to complete the election of the members of the Managing Committee of the petitioner as early as possible preferably within a period of three months from the date of receipt of writ of this Court. It was further directed that till the election is completed and the result is declared and newly elected body assumes the Office, the State Government shall not appoint the custodian under Section 74D of the Act on condition that the petitioner continues its regular activities of banking business and other day to day activities and shall not take any major policy decision referred to hereinabove. 2.5 Pursuant to the proposal being made for amendment of byelaws amongst other amendment to byelaw No.26-G, the Registrar, Cooperative Societies, State of Gujarat passed an order registering the amendment under Section 13 whereby, the said amendment is granted. 2.6 On 20th November 2004, a meeting of the Board of Directors of the petitioner was held where a resolution was passed, requesting the State Government that in view of the return of the share capital, abandonment of the Bank guarantees and in view of the amendment to byelaw No.26-G and considering the fact that as no financial interest of any nature whatsoever was existing of the State Government, State Government be requested not to appoint its representatives under Section 80(1) of the said Act. 2.7 Thereafter, respondent No.2 directed the petitioner somewhere on 1st December 2004 to publish the provisional list of voters and also declared the stages for preparation and publication of the final list of voters. Respondent No.2 after hearing the objections instead of publishing the final list of voters as per the election programme issued the notice in daily newspaper dated 27th December 2004 containing his decision to postpone the hearing of objections till 12.00 hours. 2.8 Being aggrieved and dissatisfied with the said action, the petitioner filed Special Civil Application No.16287 of 2004 before this Court challenging the action of the Election Officer and for quashing and setting aside the order dated 16th December 2004. Meanwhile, respondent No.2 had published the final list of voters on 20th December 2004 and thereafter the election programme came to be published on 27th December 2004 and the election of the members of the Board of Directors of the petitioner bank was held on 28th January 2005 and the result thereof as provided under the provisions of Rule 31 was declared. The petitioner addressed a letter dated 23rd December 2004 to Secretary, Cooperative Department on behalf of the petitioner with a copy marked to the Registrar, Cooperative Societies, State of Gujarat, Gandhinagar, requesting State Government not to exercise powers under Section 80(1) of the said Act which provides bar to appoint Government Nominees. 2.9 As the petitioner apprehended that the State Government may appoint somebody on the Board of Directors of the petitioner society to get control over its management may exercise the power in the so called public interest under the provisions of sub section (2) of Section 80 of the Act filed Special Civil Application No.106 of 2005 before this Court somewhere on 7th January 2005. 2.10 The aforesaid Special Civil Application No.106 of 2005 came up for admission hearing during winter vacation on 7th January 2005 and after hearing the petitioner, this Court was pleased to issue notice making it returnable on 11th January 2005. On 11th January 2005, the Government authorities prayed for time and the same was granted by this Court for filing the affidavit in reply. 2.11 Thereafter, the declaration of the result of the members of the Board of Directors, the first meeting of the members of the Board of Directors is required to be held for the purpose of election of the office bearers viz. the Chairman and Vice Chairman from amongst the elected members of the Board of Directors of the petitioner bank. The respondent No.2, therefore, in purported exercise of power under the provisions of Section 145-Z (which provides special provisions for Election of Officer of Specified Societies) of the Act issued the agenda notice on 28th January 2005 for the purpose of electing the office bearers viz. Chairman and Vice Chairman and the meeting for electing the Chairman and Vice Chairman of the petitioner bank was scheduled to be held on 16th February 2005. 2.12 As the petitioner bank was apprehending the appointment of the nominated Directors by the Government under the provisions of Section 80 of the Act and since above mentioned Special Civil Application No.106 of 2005 was listed for admission hearing before this Court on 15th February 2005, the petitioner had requested this Court to take up the matter for the purpose of hearing of prayer for interim relief in the said Special Civil Application. The learned AGP appearing in the matter had requested the Court to keep the hearing of the above mentioned Special Civil Application No.106 of 2005 on 16th February 2005, since the meeting was scheduled to be held on 11.30 A.M., the hearing of the above mentioned SCA was peremptorily fixed at 11.00 A.M. by this Court on 16th February 2005. 2.13 On 16th February 2005, the Additional Advocate General, Mr.K.B.Trivedi appeared in the above mentioned SCA for Election Officer and made a categorical statement before the Court to the effect that the Government is not contemplating to appoint its Nominees on the Board of Directors of the petitioner bank in exercise of the power under the provisions of sub section (2) of Section 80 of the said Act. 2.14 It may be noted that one Mr.Chandrakant Dahyabhai Patel, respondent No.1 herein filed Lavad Suit under Section 96 of the Act on 16th February 2005 before the Registrar's Board of Nominees, Ahmedabad Division, Ahmedabad for injunction against holding of the first meeting of the Board of Directors of the petitioner society for the purpose of election of its Chairman and Vice Chairman being Lavad Suit No.170 of 2005. Along with the suit, the respondent No.1 herein also filed application for interim injunction on the same day. 2.15 The Registrar's Board of Nominee, Ahmedabad Division, Ahmedabad on 16th February 2005 passed ex parte ad interim stay order in terms of paragraph 8(A) of the interim stay application which I have already set out earlier in my opening paragraph. 2.16 The learned advocate appearing for the petitioner has specifically alleged that though scheduled time of the meeting is at 11.30 A.M. and though respondent No.2 was under an obligation to remain present at the place of the meeting prior to the scheduled time of the meeting or at least at the scheduled time and place as per the agenda notice on 16th February 2005, respondent No.2 did not remain present to preside over the meeting. On the same day, at about 12.10 noon, the respondent No.2 through his messenger had communicated his decision under the covering letter that respondent No.1 herein filed Lavad Suit No.170 of 2005 before the Registrar's, Board of Nominees, Ahmedabad Division, Ahmedabad and has prayed for stay of the meeting scheduled to be held on 16th February 2005 and that the Registrar's, Board of Nominees, Ahmedabad Division, Ahmedabad has granted stay upto 24th February 2005 and accordingly he is postponing the meeting. The said decision has been communicated at 12.10 hours on 16th February 2005, that is to say after the scheduled time of the meeting which was scheduled to be held at 11.30 A.M. 2.17 Being aggrieved and dissatisfied with the same, the petitioner has filed the present Special Civil Application before this Court challenging the order dated 16th February 2005 passed by the Registrar's, Board of Nominees, Ahmedabad Division, Ahmedabad below Exh.5 as well as challenging the subsequent order of respondent No.2 dated 16th February 2005. The petition was filed on 18th February 2005. 2.18 On 18th February 2005, this Court while issuing NOTICE, granted stay of the order dated 16th February 2005 passed by the Registrar's, Board of Nominees below Exh.5 in Arbitration Suit No.170 of 2005 and NOTICE was made returnable on 22nd February 2005. 2.19 Though respondents are served, respondent No.1 chooses not to appear on 22nd February 2005 and on request made by the learned AGP, the matter was adjourned. When the mater reached for hearing on 4th March 2004, an oral contention is made on behalf of the State of Gujarat through learned Additional Advocate General for impleading State of Gujarat as necessary and proper party. The said oral application was too objected by the learned advocate appearing for the petitioner. Learned advocate for the petitioner Mr.Harin Raval has made elaborate arguments and concluded with the aspect of joinder of State of Gujarat as necessary party on 4th March 2005. After conclusion of arguments on the said issue, the matter was adjourned to 7th March 2005. On 7th March 2005, the matter was heard for some time and adjourned to 9th March 2005. On 9th March 2005 an affidavit in reply is filed and served on the petitioner in the above mentioned petition. 2.20 It may be noted that on 8th March 2005, an affidavit in rejoinder has also been filed by the petitioner in Special Civil Application No.106 of 2005, controverting the averments of the State of Gujarat as averred in affidavit in reply filed on behalf of the respondent No.1 - State in SCA 106 of 2005. 2.21 It may be noted that thereafter, ultimately, this Court has passed an order on 10th March 2005 to make the State Government as a necessary party as respondent No.3 i.e. the State of Gujarat may be considered as respondent No.3. Mr.A.D.Oza, learned Government Pleader appeared on behalf of respondent No.3. He has adopted the arguments of learned Additional Advocate General in this behalf. 2.22 Ultimately, on 14th March 2005 hearing took place. Thereafter, on 21st March 2005 further hearing took place and ultimately, on 22nd March 2005, hearing completed. SALIENT PROVISIONS OF THE ACT ON WHICH LEARNED ADVOCATE APPEARING FOR THE PETITIONER HAS INVITED THE ATTENTION OF THE COURT:- 3. Before Mr.Harin Raval, learned advocate appearing for the petitioner made submissions, he has invited my attention to the following salient provisions of the Act in this behalf. 3.1 Section 2(2) provides definition of "bye-laws" means bye-laws registered under this Act and for the time being in force and include registered amendments of such bye-laws. Section 2(5) provides, "committee" means the committee of management, or other directing body, to which the management of the affairs of a society is entrusted. Section 2(13) provides definition of member, "member" means a person joining in an application for the registration of a co-operative society which is subsequently registered, or a person, duly admitted to membership of a society after registration, and includes a nominal associate or sympathizer member. Section 2(14) provides definition of officer, "officer" means a person elected or appointed by a society to any office of such society according to its bye-laws, and includes a chairman, vice-chairman, president, vice-president, managing director, manager, secretary, treasurer, member of the committee, and any other person elected or appointed under this Act, the rules or the bye-laws, to give directions in regard to the business of such society. Section 2(17) provides, "Registrar" means a person appointed to be the Registrar of Co-operative Societies under this Act; and includes to the extent of the powers of the Registrar conferred on any other person under this Act, such person and includes an Additional or Joint Registrar. 3.2 Chapter VII of the said Act provides, Management of Societies. Section 73 provides final authority of society. Section 74 provides, Committee, its powers and functions. Section 74C provides; "Provision for conduct of elections of committees and officers of certain societies and term of office of members of committees-(1) The election of members of the committees and of the officers by the committee, of the societies of the categories mentioned below shall be subject to the provisions of Chapter XI-A and shall be conducted in the manner laid down by or under that Chapter:- (i) Apex societies mentioned in the Schedule and such other apex societies as the State Government may, by general or special order, published in the Official Gazette, from time to time specify in this behalf, having regard to financial position and share capital of such societies. (ii) all District Central Co-operative Banks. (iii) XXXXX (iv) (a) XXXX (b) XXXX (v) XXXX (vi) XXXX (vi-a) XXXX (vi-b) XXXX (vii) XXXX (2) When the election of all the members of the committee or any such societies held at the same time, the members elected on the committee at such general election shall hold office for a period of 3 (three years) from the date on which the first meeting is held and shall continue in office until immediately before the first meeting of the members of the new committee. (3) Notwithstanding anything in the bye-laws of such society, the committee or management shall be elected by a general body of members of the society and all other committees authorized by or under the bye-laws may be constituted by electing or appointing persons from among the persons who are members of the committee of management, and all such committees shall be sub-committees of the committee of management, and shall be subordinate to it. Provided that it shall be lawful for the State Government, - (a) to nominate its representatives on a Committee of any such society under section 80, or (by) to nominate the first Committee of Management of any such society where the bye-laws of such society so provide. [Provided further that it shall be lawful for any body or authority to nominate its representative on a Committee of such society where the bye-laws of such society so provide." 3.3 Section 80 of the Act provides, power to appoint Government nominee - "(1) Where the State Government has subscribed to the share capital of a society, directly or through another society, or has guaranteed the repayment of the principal of and payment of interest on, debentures issued or loans raised by a society, [the State Government shall, notwithstanding anything contained in the bye-laws of such society, have the right to nominate three representatives on the Committee of such society], in such manner as may be determined by the State Government from time to time. The members so nominate shall hold office during the pleasure of the State Government, or for such period as may be specified in the order by which they are appointed, and any such member on assuming office shall have all rights, duties, responsibilities and liabilities as if he were a member of the committee duly elected. [Explanation - Any nomination of the Registrar or his nominee on the Committee of a society under the bye-laws of such society shall not be construed as nomination of the representative on that Committee in exercise of the right of the State Government under this sub-section] (2) Where the State Government is of the opinion that having regard to the public interest involved in the operation of a society it is necessary or expedient so to do, it may nominate its representatives on the committee of such society as if the State Government had subscribed to the share capital of the society and the provisions of sub-section (1) shall, so far as may be, apply to such nomination." 3.4 Section 81 provides, supersession of committee. Section 96 provides, disputes to be resolved amongst the members which is included in Chapter 9, process for deciding dispute. Chapter 11A provides, elections of Committees and Officers of certain Societies. Section 145-A provides, application - All sections of this Chapter except section [145-Z] shall apply to elections to committees of societies belonging to the categories specified in section 74C. Section 145-B provides, definitions. Particularly Section 145-B(b) provides, "election" means election of a member or members of the committee of a specified society. Section 145-B(c) provides, "specified society" means a society belonging to any of the categories specified in section 74C. Section 145-C provides, time when election to be held. Section 145-D provides, conduct of elections. 3.5 Section 145-Z provides, special provision for election of officers of specified societies. "(1) This section shall apply only to election of officers by members of committees of societies belonging to the categories specified in section 74C. (2) After the election of the members of the committee or whenever such election is due, the election of the officer or officers of any such society shall be held as provided in its bye-laws, but any meeting of the committee for this purpose shall be presided over by the Collector or an officer nominated by him in this behalf." 3.6 Section 160 provides, the power of the State Government to frame rules. Section 161 provides, power to exempt societies form provisions of Act. 3.7 In exercise of the said power, the Government has enacted Gujarat Cooperative Societies Rules, 1965. Rule 5 of the said Act provides, making of bye-laws. Rule 6 provides, amendment of bye-laws. Chapter 5 provides, property and funds of society. Rule 29 provides, investment of funds. Rule 30 provides 30 provides, restrictions on investment. Rule 31 provides, contribution to Education Fund :- "Every Society which pays dividend to its members shall contribute towards the education fund of the Gujarat State Co-operative Union directly at the following rates." Rule 32 provides, qualifications for the members of the committee. 3.8 It may be noted that in exercise of the said statutory power, the State Government