IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.18290 of 2008 1. Dr. .Sunil Kumar Singh, son of Sri Maharana Pratap Singh, Chairman, Bihar State Co-operative Marketing Union Ltd. (BISCOMAUN), Patna, Police Station- Gandhi Maidan Town and District-Patna 2. Board of Directors of the Bihar State Co-operative Marketing Union Ltd. (BISCOMAUN), Patna through its Chairman (Petitioner No.1), ……………….. Petitioners Versus 1. The State of Bihar through its Secretary, Co-operative Department, Government of Bihar, Patna 2. State Co-operative Minister, Government of Bihar, Patna 3. The Registrar, Co-operative Societies, Bihar, Patna 4. Sri Surendra Prasad Singh, s/o not known, Additional Registrar, Co- operative Societies, Bihar, Patna 5. Sri Ramayan Choudhary, s/o not known, Joint Registrar, Co- operative Societies, Bihar, Patna 6. Shri J.J.Alam, s/o not known, Special Officer (Consumer), Bihar, Patna 7. Shri Ashok Kumar Jha, s/o not known, Deputy Registrar, Co- operative Societies, Bihar, Patna presently posted as Managing Director, BISCOMAUN, Patna 8. Shri Vishal Singh, Representative, BISCOMAUN, Udwant Nagar Vyapar Mandal Ara 9. Shri Jitendra Kumar Sinha, District Magistrate, Patna-cum- Special Officer of BISCOMAUN. ……………………. Respondents. with CWJC No.470 of 2009 1. Raghubansh Narain Singh S/o Late Ramphal Singh, Director, Bihar State Co-operative Marketing Union Ltd. (BISCOMAUN), Patna, P.S. Gandhi Maidan, Town & District- Patna 2. Ram Vishun Singh, S/o Late Sheo Lakhan Prasad, Director, Bihar State Co-operative Marketing Union Ltd. (BISCOMAUN), Patna, P.S. Gandhi Maidan, Town & District- Patna ……. Petitioners Versus 1. The State of Bihar through its Secretary, Co-operative Department, Government of Bihar, Patna 2. The Registrar, Co-operative Societies, Bihar, Patna 3. Shri A K. Jha, father‟s name not known, Deputy Registrar, Co- operative Societies, at present posted as Managing Director, Bihar State Co-operative Marketing Union Ltd.(BISCOMAUN), Patna 4. Shri Jitendra Kumar Sinha, District Magistrate, Patna-cum- Special Officer of BISCOMAUN. ……………………. Respondents. ----------- - 2 - CWJC No. 18290/2008 For the petitioners:- M/S Y.V.Giri, Sr. Advocate, Ishwari Singh, Kiran Kumari, Punita Kumari Singh and Varun Kumar, Advocates For the State: M/S P.K.Shahi, Advocate General, Vikas Kumar, AC to Advocate General For Resp. No. 7: M/s Lalit Kishore, Sr. Advocate and Girigesh Kumar, Advocate For the Intervenor:- Mr. Ajay Kumar Sinha, Advocate. CWJC No. 18290/2008 For the petitioners: M/S Nitiranjan Jha & Rakesh Kr. Jha, Advocates For the State: M/S P.K.Shahi, Advocate General, Vikas Kumar, AC to Advocate General For Resp. No. 3 : M/S Lalit Kishore, Sr. Advocate & Girijesh Kumar, Advocate. ------------ O R D E R 12. 11.05.2009 Both the writ applications raise common issues pertaining to the suspension of the Managing Committee/ Board of Directors of the Bihar State Co-operative Marketing Union Ltd. (BISCOMAUN) by order dated 12.1.2009 passed by the Registrar, Co-operative Societies, Bihar and accordingly they have been heard together and are being disposed of by this common order. The petitioners seek quashing of the aforesaid order dated 12.1.2009 by which the Managing Committee/Board of Directors of BISCOMAUN has been suspended for a period of six months by the Registrar, Co-operative Societies, Bihar in exercise of the powers under Section 41(1) of the Bihar Co-operative Societies Act, 1935 and the District Magistrate, Patna has been appointed as the Special Officer for carrying on the functions of the Board of Directors. The facts of the case lie in a narrow compass. On 16.10.2008, the intervenor, respondent no. 8, Vishal Singh, a - 3 - representative of the BISCOMAUN from Udwant Nagar Vyapar Mandal, Ara filed a petition before the Registrar, Co-operative Societies, respondent no. 3 making allegations under 14 heads against the Board of Directors of BISCOMAUN and its Chairman alleging mismanagement and negligence in the performance of duties by them and requesting that the Board should be suspended in terms of Section 41(1) of the Act. A copy of the said petition was also sent to the Minister, Co-operative Department, Government of Bihar who also put up a note in lieu of buff-sheet before the Registrar, Co-operative Societies referring to the aforesaid letter stating that the facts mentioned in the letter should be examined and immediate necessary action should be taken in accordance with law and he should also be informed about the action taken through the concerned file. Pursuant to the said petition by order dated 20.10.2008 (Annexure-5), the Registrar appointed a three-member Committee headed by the Additional Registrar, Co-operative Societies to look into the allegations and submit its enquiry report within fifteen days. The report of the three-member Committee was submitted to the Registrar on 4.12.2008 in which most of the allegations were found true. On the basis of the same an order bearing memo no. 7566 dated 5.12.2008 was issued by the Registrar enclosing the allegation petition and the report of the three-member Enquiry Committee directing the Board of Directors of BISCOMAUN to show cause within 21 days as to why the Board of Directors be not suspended in exercise of powers under Section 41(1) of the Act. A copy of the said show cause was sent to - 4 - the Managing Director, BISCOMAUN with a request to serve the copy of the order upon all the members of the Board of Directors along with photo copy of complaint petition and enquiry report. On receipt of the same the said order of show cause dated 5.12.2008 has been challenged before this Court in the first writ petition being CWJC No. 18290/2008 by the two petitioners, namely, Dr. Sunil Kumar Singh, Chairman of the BISCOMAUN and the Board of Directors though its Chairman, the petitioner no.1, praying to quash the order dated 5.12.2008 . The matter was pressed on 23.12.2008 for grant of an interim order staying the show cause notice which was served upon the petitioners on 10.12.2008. By order dated 23.12.2008 while refusing the prayer for stay of the order dated 5.12.2008 this Court considering the submission of learned counsel for the petitioners that the show cause notice had been served on 10.12.2008 directed that in terms of the statutory provisions the petitioners shall be permitted to file their show cause by 31st December, 2008 and thereafter to consider the same in accordance with law. On 30.12.2008 the petitioner no. 1 of the first writ application, Chairman of the Board of Directors filed his show cause stating that it is the preliminary reply to the show cause by the Chairman of the BISCOMAUN in his personal capacity on the basis of the evidence/ documents available with him and on the basis of his memory. In the said reply he alleged that the three-member Committee had been constituted and the notices were issued on the direction of the Minister, Co-operative Department and further that the - 5 - Committee had submitted its report on the pressure of the Minister and in conspiracy with the Managing Director and Respondent No. 8 on imaginary basis and without examining the same he had issued the show cause notice. It was also alleged that several times the petitioner no. 1 had orally and in writing requested the Managing Director to make available the files relating to the enquiry report and to convene the meeting of the Board of Directors but in conspiracy the same was not called and by his letter dated 17.12.2008 addressed to the Registrar the M.D. stated that for giving reply to the show cause notice there is no justification for calling a meeting of Board of Directors, a copy of which was given to petitioner no. 1 also. It was also pointed out that on 19.12.2008 the Chairman had informed the Registrar of all the aspects of the matter and requested him to get the meeting of the Board of Directors convened and the files concerning the enquiry report to be given since effective reply could be submitted only by the Board of Directors and no reply by a Director at his personal level can be considered as of the Board of Directors. Since the meeting of the Board of Directors was not called and the evidence/documents not provided to the Board or to him it was submitted that at that preliminary stage the reply was being submitted on the basis of the evidence/files available with him and according to his memory. Thereafter by the impugned order dated 12.1.2009 the Respondent no.3, Registrar, Co-operative Societies considered the show cause reply filed by the petitioner no. 1 and, after finding several of the charges proved, passed the aforesaid order suspending the - 6 - Board of Directors. Learned counsel for the petitioners in the first writ petition submits that the impugned order has been passed in violation of the principles of natural justice. It is submitted that repeatedly the petitioner no. 1 had requested the Managing Director for convening the meeting of the Board of Directors so that a collective show cause could be filed on behalf of the Board of Directors but the same was not done. The matter was also taken to the Registrar and the Registrar ought to have directed the Managing Director to convene the meeting for the said purpose and supply all the files to the petitioners; but the same not having been done, amounts to a clear violation of the principles of natural justice. It is argued that under Section 14(3)(ii) of the Act it is the function of the Managing Director to convene the meetings of the Managing Committee and the petitioner no.1, the Chairman requested the Managing Director, Respondent No.7, to do so and he ought not to have refused to convene the meeting. It is thus urged that the Managing Director was acting in a manner so as to prevent the Board of Directors from exercising its right of filing the show cause. In this context, learned counsel refers to the counter affidavit of respondent no. 7 in which he has sought to support his stand that the reply should be given individually by the Chairman and each of the Directors and not by the Board as a body and the justification of the same in the impugned order by the Registrar that the reply should be individual and not of the Board. It is the contention of the learned counsel that - 7 - under Section 41(1) of the Act, it is the objection of the Board of Directors that has to be considered by the Registrar before passing an order of suspension and for the said reason also the answer to the show cause should be the product of the collective application of mind of the Board of Directors and not of each separate constituent member of the Board. Thus, according to him, preventing the meeting of the Board of Directors to file the collective show cause amounts to depriving it of its right of filing an effective show cause and the impugned order passed thereafter is illegal and invalid for the said reason. Learned counsel also refers to the letter dated 6.1.2009 and 9.1.2009 sent by petitioner no.1, Chairman by which he had requested the Registrar to permit him to place his case before him through an Advocate but the same was not permitted and the same also amounts to refusal of the right of personal hearing without any justifiable reason and thus further violative of the principles of natural justice. In this context, he refers to a decision of the Supreme Court in the case of Swadeshi Cotton Mills Vs. Union of India and analogous cases: (1981) 1 SCC 664, in para-32 of which it has been held as follows:- “The maxim audi alteram partem has many facets. Two of them are: (a) notice of the case to be met; and (b) opportunity to explain. This rule is universally respected and duty to afford a fair hearing in Lord Loreburn‟s oft-quoted language, is “a duty lying upon everyone who decides something”, in the exercise of legal power. The rule cannot be sacrificed at the altar of administrative convenience or celerity; for, “convenience and justice”- as Lord Atkin felicitously - 8 - put it – “are often not on speaking terms” He further relies upon the Supreme Court decision in the case of State of U.P. and others Vs. Maharaja Dharmander Prasad Singh & ors. and another analogous case: (1989) 2 SCC 505, in para 64 of which it has been held as follows:- “On the point of denial of natural justice, we agree with conclusion of the High Court, though not for the same reasons, that there has been such a denial in the proceedings culminating in the order of cancellation. The show cause notice itself is an impalpable congeries of suspicions and fears, of relevant or irrelevant matter and has included some trivia. On a matter of such importance where the stakes are heavy for the lessees who claim to have made large investments on the project and where a number of grounds require the determination of factual matters of some complexity, the statutory authority should, in the facts of this case, have afforded a personal hearing.” He further relies upon the Supreme Court decision in the case of Canara Bank Vs. V.K.Awasthy : (2005) 6 SCC 321, para 14 of which is quoted below : “Concept of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed thereunder. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry is held. The old distinction between a judicial act and an administrative act has withered away. Even an administrative order which involves civil consequences must be consistent with the rules of natural justice. The expression “civil consequences” encompasses infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. In its wide umbrella comes everything that affects a citizen in his civil life.” - 9 - Another submission of learned counsel for the petitioners is that the findings of the Registrar are based upon the report dated 4.12.2008 of the three-member Enquiry Committee which itself is constituted contrary to the provisions of Section 35 of the Act. According to him, in such statutory enquiry opportunity ought to have been given to the Managing Committee/Board of Directors but the same was not done. It is also argued that the Committee had not been constituted either on the request of the District Collector or on the application of a majority of the Managing Committee or of not less than one-third of the members; rather the same has been done on the basis of a complaint filed by an outsider which is not permissible. It is also the contention of learned counsel that the findings of the Registrar are bad on three counts, namely, non- consideration of relevant materials, consideration of irrelevant materials and further the findings are contrary to the statutory duties imposed. It is submitted that under the bye-law 43(1) it is the duty of the Managing Director to summon all meetings and further under bye-law 21 orders for the general meeting shall be issued by the Managing Director. Thus, it is submitted that it is the Managing Director who is responsible for calling the general meeting and if he has failed to do so the said charge, being Charge No.1, cannot be laid at the door of the Board of Directors of BISCOMAUN as has been done in the present matter. - 10 - Regarding Charge No.2, i.e., non-preparation of Budget also it is submitted that the same is the duty of the Managing Director under bye-law 36(4) under which he is required to ensure that all accounts and registers, vouchers, balance sheets and other documents required for the transaction of the business of the Union are maintained properly with the assistance of the staff. In this regard, it is further submitted that the findings have been recorded in the order of the Registrar against the Managing Director also and thus the said charge could not have been held against the Board of Directors so as to suspend it. Similarly, with regard to charge no. 3, it is submitted that the matter related to increase of share capital which action has been upheld up till the High Court and the same has been done in a general meeting by a resolution taken in June, 2005 and in which all had participated and thus it cannot be said that any of the members of the BISCOMAUN was unaware of the same. It is contended that the District Co-operative Officer had been issued letter by the BISCOMAUN on 1.2.2007 and 27.2.2007 to ensure that all the members were informed about the increase of share capital and their responsibility to deposit the additional amount on such increase and thus it cannot be said that there was attempt by the members of the Board of Directors to prevent knowledge of the fact to the other member societies so that the society could not be eligible to send delegates. Similarly with respect to the other charges it is urged - 11 - that sufficient proof was shown that the Board of Directors was not responsible in the matter and all the charges are well explained. Learned counsel for the petitioners in CWJC No. 470/2009, while adopting the above submissions, additionally points out that they had repeatedly requested the Registrar to convene the meeting of the Board of Directors and supply relevant papers and to issue direction to the Managing Director in this regard but the same was not done and thus the reply on behalf of the Board of Directors could not be filed. He also refers to the admission of the fact in the impugned order that as many as six Directors had requested the Registrar to convene the meeting of the Board of Directors. It is thus submitted that they were prevented from filing their show cause in the matter and on the said ground alone the impugned order is fit to be set aside. Learned counsels for the petitioners have also strongly denounced the actions of the Managing Director of BISCOMAUN who has been impleaded as respondent by name. It is submitted that he has acted in a mala fide manner and violated the statutory rules and bye-laws by repeatedly disobeying the request made by the Chairman for convening the meeting of the Board of Directors. It is submitted that the notice dated 5.12.2008 was clearly issued to the Board of Directors to show cause why it should not be suspended and thus in terms of the order dated 5.12.2008 the reply to the show cause was to be expected through the Board of Directors and in the said circumstances, the Managing Director could not have acted in the - 12 - matter arbitrarily in not convening the meeting of the Board of Directors even upon several requests made by the Chairman. It is further pointed out that the Managing Director, Ashok Kumar Jha had further ensured that no file or document was ever placed before the Chairman of the Board of Directors. In this regard reference is made to his order dated 16.12.2008 in which he had directed the office of the BISCOMAUN and departmental heads to route all files and documents through the Chairman. It is further alleged that the said Managing Director in collusion with the Registrar and the complainant had sought to ensure that the Board was not allowed to meet in order to submit any show cause and even the Chairman was deprived of the perusal of the files and prevented from filing an effective show cause. It is submitted that in this regard he was acting contrary to the provisions of Section 14(3) of the Act and bye-law 42 which provides that he shall be responsible for the general administration of the Union subject to the general orders and special directions of the Board of Directors and Working Committee. Since he was responsible for convening the meeting of the Committee he ought to have convened the meeting of the Board of Directors on the request of the Chairman and not stood in the way acting as an agent of the complainant, Vishal Singh in the present matter. It is also argued that as the Managing Director it was his duty to keep the Board informed about all the matters including putting up proposal for its consideration for the calling of the Annual General Meeting and also to take steps for preparation of the Budget - 13 - and getting it sanctioned by the Board which he had completely failed to do. It is further submitted by learned counsels for the petitioners that even in the impugned order several of the findings have been recorded against the Managing Director also, yet he has been allowed to continue as the Managing Director despite the suspension of the Board. According to learned counsels the Managing Director is a directly nominated person in the Board by the State Government and if the Board of Directors is suspended then the Managing Director must also go out with the Board since he is equally responsible for the acts or omissions of the Board of Directors, if not more, on account of the day to day functioning and other matters like calling meeting, etc., and preparation of Budget, etc., being part of his personal responsibility. Another contention of learned counsels for the petitioners is that under Section 41(1) an order can only be passed by the Registrar after obtaining opinion from the Chief Executive of the affiliating Federation/Society. It is submitted that the same has not been done and for that reason also the statutory pre-condition for passing the order not having been satisfied, the order would be void and illegal. Learned Advocate General appearing for the State of Bihar and learned counsel for Mr. Vishal Singh, respondent no. 8, on the other hand, submit that the main ground on which the petitioners seek to challenge the impugned order in the writ application, that is, non-compliance of the principles of natural justice on account of the - 14 - Board not having been allowed to file show cause has no legs to stand in view of Rule 28 of the Bihar Co-operative Societies Rules, 1959. The said Rule provides that the Secretary or on his failure the Chairman shall convene the meeting of the Managing Committee at least once in three months or as often as may be considered necessary for the transaction of the business of the Society. It is thus submitted that while under Section 14(3)(ii) of the Act it is the power and function of the Managing Director to convene the meeting of the Managing Committee but in addition power has been conferred upon the Chairman also by the Statutory rules to convene the meeting on the failure of the Managing Director to do so. It is submitted that it was open to the Chairman, petitioner No.1, to call the meeting of the Board of Directors, if it was so thought necessary by him, for the purpose of filing reply to the show cause. According to learned counsels for the respondents the failure of the Chairman to call the meeting was deliberate so as to create a ground for challenging the order before this Court and thus the non-convening of the meeting of the Board of Directors is a mere excuse in order to take such stand. It is urged that no one can be permitted to take advantage of his own wrong, of commission or omission, and the Chairman having failed to exercise his power to convene the meeting of the Board of Directors cannot be permitted to turn around and urge that point in support of his case. In this regard it is submitted by learned counsels that request of