W.P.(C) No.1963/2010 Page 1 of 23 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) No.1963/2010 Reserved on: 4th June, 2010 Pronounced on: 2nd July, 2010 SH. MUKESH BHATT & OTHERS ...... Petitioners Through: Mr. A. K. Singh, Advocate with Mr. Tauseef Akhtar, Advocate. VERSUS CENTRAL REGISTRAR (COOPERATIVE SOCIETIES) & OTHERS ....Respondents Through: Mr. A.S. Chandhiok, ASG with Mr. B.V. Niren, Advocate and Mr. Bhagat Singh, Advocate for respondent Nos.1, 6 and 8. Ms. Monika Garg, Advocate for the respondent No.2. Mr. Sunil Gupta, Senior Advocate with Mr. Tanmay Agarwal, Advocate and Mr. Gaurav Agarwal, Advocate for the respondent Nos. 3 to 5. Dr. A.M. Singhvi, Senior Advocate with Mr. Ankur Mody, Advocate, Mr. Rook Ray, Advocate and Mr. Aneesh Pathak, Advocate for the respondent No.7. Mr. Sidharth Singla, Advocate for the Intervener. Mr. R.K. Kapoor, Advocate for the Intervener. CORAM: HON’BLE MR. JUSTICE SANJAY KISHAN KAUL HON’BLE MR. JUSTICE VALMIKI J.MEHTA W.P.(C) No.1963/2010 Page 2 of 23 1. Whether the Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not? 3. Whether the judgment should be reported in the Digest? % JUDGMENT VALMIKI J. MEHTA, J 1. The Cooperative Store Limited, commonly identified as Super Bazar, (hereinafter referred to as the „cooperative society‟) was registered under the Multi-Unit Cooperative Societies Act, 1942. The UOI (through Ministry of Consumer Affairs) respondent No.8 in the present petition has a 72% holding in the cooperative society. On account of the cooperative society running into huge losses running into hundreds of crores of rupees, the same was ordered to be liquidated vide an order dated 5.7.02 passed by the Central Registrar acting under the extant Multi-State Cooperative Societies Act, 2002 (hereinafter referred to as the „said Act‟). On a petition being filed before the Supreme Court by the employees union, the Supreme Court passed various orders for revival of the cooperative society, the principal object of revival being to ensure that the workers do not lose their jobs. 2. The main petitions in the Supreme Court were S.L.P. (C) Nos. 8398-99/05. Various orders came to be passed from time to time by the Supreme Court and a reference at this stage can be made to some of these W.P.(C) No.1963/2010 Page 3 of 23 orders and the important observations therein. Vide order dated 28.2.06, the Supreme Court noted that there was a need for professional management for Super Bazar. Thereafter, on 5.5.06, the Supreme Court directed that a scheme be framed by a committee so that bidders can make bids for taking over the cooperative society. Guidelines were also laid down for evaluation of the bids. The first important order thereafter is the order dated 26.7.06, wherein, the Supreme Court noted that a solution will have to be found, considering that the said Act was applicable, so that the bidders can bring in funds towards the share capital and they should be given sufficient control of the management of the society. It was further noted that such a bidder who is ultimately selected to infuse funds should enjoy a legal status within the scheme of the Act. It was noted that to achieve the aforesaid object, it may be necessary to amend the Bye Laws or get issued appropriate directions by the Central Registrar functioning under the Act. 3. The next important order thereafter is the order dated 12.12.06 in which the Supreme Court noted that M/s Reliance Industries showed its disinclination to be a part of the revival process of the cooperative society by making of the bid inasmuch as under the said Act there was a restriction of a maximum holding of 20% of the shares which would not give effective control and management to the Reliance Industries. It was therefore submitted on behalf of M/s. Reliance Industries that unless appropriate amendments were W.P.(C) No.1963/2010 Page 4 of 23 made in the Act, Rules and the Bye Laws it would not be possible for Reliance Industries to invest in the cooperative society. The Supreme Court directed the counsel for the UOI to seek instructions whether the Act and the Rules can be suitably amended to cover such exceptional situations. Thereafter, various orders were passed and which considered the bids which were submitted by the different bidders. Some bids were thereafter withdrawn. The bid which was finally accepted was/is of M/s. Writers & Publishers Ltd., respondent No.7 herein. This is noted by the Supreme Court in its order dated 12.2.08. 4. In the next set of orders, the first important order is the order dated 7.5.08 in which the Supreme Court, inter alia, observed as under: “ One aspect needs to be clarified. Under the recommendations dated 3rd August, 2007 made by the Evaluation Committee, the successful bidder is required to get the by-laws of Super Bazar amended. That amendment can be made only by the Official Liquidator. However, it appears that as a result of the said amendment, the share capital of Super Bazar might have to be enhanced. Therefore, the highest bidder should undertake that in such eventuality, it will stand by the enhancement of the share capital and reconstitution of the new Boad of Super Bazar to be done in accordance with the provisions of Multi-State Cooperative Societies Act, 2002.” “At this stage, learned counsel appearing for NDMC submits that apart from vacant office premises, the remaining area is in occupation of Super Bazar under a lease. Learned counsel submits that the lease rent also needs to be revised if a private company is going to take over the business. We do not find merit in this contention for two reasons. Firstly, the lessor of the property is W.P.(C) No.1963/2010 Page 5 of 23 UOI. As stated above, UOI has waived Rs.114 Crores liability. It is the case of the UOI that they want Super Bazar to be revived. Revival of the Super Bazar is the predominant object of this exercise. In the circumstance, we make it clear that in respect of the premises other than the vacant office premises, NDMC will not enforce the eviction notices/orders on the ground of rent being revised because they would be entitled to revision only in accordance with the lease and nothing beyond that. We also make it clear that this order is being passed under Article 142 of the Constitution in order to do complete justice between the parties and, particularly, keeping in mind the predominant object of this exercise, namely, revival of Super Bazar.” The aforesaid observations of the Supreme Court made two things very clear. Firstly, the whole aim and object of the exercise was the revival of the Super Bazaar, meaning thereby nothing should obstruct the revival of the Super Bazar. The second aspect is that the orders were passed by the Supreme Court under its plenary power under Article 142 of Constitution of India to do complete justice keeping in mind the predominant object of revival of the Super Bazaar. The next order of the Supreme Court dated 26.2.09 notes that M/s Writers & Publishers Ltd., respondent No.7 are the only bidders in the field whose name has been recommended by the Evaluation Committee. The Supreme Court, therefore pending the revival of the cooperative society, directed the suspension of the winding up order dated 5.7.02 clarifying that on coming into force of the revival scheme the same will substitute the order of winding up. W.P.(C) No.1963/2010 Page 6 of 23 5. The Union of India (UOI) vide its letter dated 9.7.09 appointed Administrators of the cooperative society and which though is an appointment in terms of Section 123 of the said Act. The action of the UOI was in furtherance of the orders of the Supreme Court as referred to above. The object of appointing the Administrators is to take over and discharge of all the functions whatsoever of the cooperative society by the Administrator(s). The term of these Administrators under Section 123 is originally for a period of six months but the term can be extended for a further period of six more months. The Act does not contemplate a term longer than a total period of one year for the Administrators. The Supreme Court, therefore, stepped in and extended the term of the Administrators in exercise of its powers under Article 142 of Constitution of India from time to time, beyond the period of one year, and the last order on this aspect extending the appointment of the Administrators is the one dated 3.5.2010 and as per which order the term of the Administrators was extended till 8.7.2010. This order dated 3.5.2010 is also important for the reason that it notes the stand of the UOI whereby the UOI states that it had the power to permit the representatives of M/s. Writers & Publishers Ltd. to manage the affairs of Super Bazar in public interest for implementation of the revival scheme suggested by the Supreme Court. The Supreme Court, then, extended W.P.(C) No.1963/2010 Page 7 of 23 the tenure of the Administrators exercising its powers under Article 142 of the Constitution. 6. Pursuant to the various orders of the Supreme Court passed till 26.2.09, the Official Liquidator (respondent No.2 herein) sent a notice dated 26.5.2009 calling for a meeting of the Smaller Representative General Body (SRGB) of the Cooperative Society. SRGB is a smaller body formed out of the larger General Body of the cooperative society which consisted of thousands of members. The role and duties of SRGB is provided for in the Bye Laws of the cooperative society as also in the Rules passed by its board. There are specific rules framed for the SRGB and which are known as the “Subsidiary Rules for constituting a Smaller Representative General Body of the Cooperative Store Limited New Delhi”. A shareholder of the cooperative society elected to the SRGB is called a „delegate‟. The delegate holds office normally for a period of three years as per the SRGB rules. 7. After the Supreme Court passed its order dated 26.2.09 suspending the winding up order and accepting the bid of M/s. Writers & Publishers Ltd., UOI issued its letter dated 23.4.09, and in which letter, UOI clarified to the Official Liquidator that amendment to the Bye Laws for bringing in the highest bidder M/s. Writers & Publishers Ltd. can only be made by the Official Liquidator. Directions were therefore issued to the Official Liquidator under Section 122 of the said Act to suitably amend the Bye Laws for enhancement W.P.(C) No.1963/2010 Page 8 of 23 of the share capital and reconstitution of the new Board of Super Bazaar keeping in mind the order of revival of the cooperative society passed by the Supreme Court and also in accordance with the provisions of the said Act. This letter of the UOI was issued to implement the orders passed by the Supreme Court from time to time. 8. The Official Liquidator, however, instead of amending the Bye Laws, himself sent a notice dated 26.5.2009 calling for a meeting of the SRGB on 11.6.2009. The SRGB on 11.6.09 unanimously adopted the resolution for amending the Bye Laws. These Bye Laws were then sent to the Central Registrar under the said Act so that the amended Bye Laws are registered with it. The Central Registrar, however, accepted some amendments and declined some amendments. The Central Registrar also amended/reframed certain Bye Laws on his own. This suo moto amendments to the Bye Laws by the Central Registrar became the basic reason for the present litigation. The suo moto amendments are to the Bye Laws numbered 6(ix), 8(e) (iv), 8(f) and 13(v) & (vi). These bye-laws as approved by the SRGB and as amended and approved by the Central Registrar read as under:- Bye Law As by SRGB As amended by the Central Registrar (Amendments in bold) W.P.(C) No.1963/2010 Page 9 of 23 6(ix) ……Notwithstanding anything contained in these byelaws the Associate members will have no right of vote at any General Body Meeting and will not be eligible to be elected on the Board. Notwithstanding anything contained in these byelaws the Associate members will have no right of vote at any General Body Meeting and will not be eligible to be elected on the Board. Further, they shall not subscribe to the share capital of the society. 8(e)(iv) Has subscribed the full value of twenty lakh shares. Has subscribed the full value of Ten(10) lakh shares. 8(f) ……has subscribed the full value of 5000 shares. However the existing members shall be exempted to subscribe to additional shares. Deleted. Deleted. 13(v) Class or classes/ persons/association of persons-Twenty lakh shares. Class or classes/ persons/association of persons-Ten(10) lakh shares. 13(vi) Associate Members-5000 shares Deleted. 9. The present writ petition has been filed by the three petitioners who claim to be members of the SRGB. The following reliefs have been prayed for in the writ petition: “a. Quashing the amendments/alteration/deletions/ modifications made by the respondent no.1 in the Bye-Laws no.6(ix), 8(e), 8(f)(iii) and its proviso, 13(a)(v), 13(a)(vi), 13(b) & 40 vide order dated 07/07/2009; W.P.(C) No.1963/2010 Page 10 of 23 b. Directing the respondent No.1 to adopt & register only the amendments made by the SRGB in the Bye-Laws of Super Bazar in its meeting dated 11.06.2009; c. Declare the appointment of the respondent no.3 to 5 vide order dated 09/07/2009 issued by the Respondent No.6, as illegal, unjustified & void ab-initio; d. To cancel enrolment of all the new members enrolled by the respondent no.3 to 5; e. To declare the decision taken by respondent 3 to 5 thereby calling upon about 45000 the old existing members/share holders to subscribe 45 new additional shares each as mentioned in the Public Notice dated 19/01/2010 as null and void;” 10. The reliefs claimed have been formulated into four propositions which have been argued by the counsel for the petitioners: (i) The Central Registrar acting under the said Act cannot, on his own, amend the Bye Laws, he could only refuse registration of the amendments sought of certain Bye Laws and if he wanted an amendment in certain Bye Laws, he could have only referred the matter back to the SRGB which was the only body which could decide as to how the Bye Laws could be amended. (ii) The appointment of the Administrators, respondent Nos.3 to 5 herein, is violative of the provisions of Sections 122 and 123 of the said Act inasmuch as there are no directions of the Central Government which are violated by the cooperative society/SRGB whereby the Administrators could have been appointed. W.P.(C) No.1963/2010 Page 11 of 23 (iii) Enrolment made of new members by the Administrators is illegal because enrolment of members can only be done by the SRGB. The action of the Administrators is said to be in violation of the decisions of the Supreme Court reported as Joint Registrar of Cooperative Society Vs. T.A. Kuttapan (2000) 6 SCC 127 and K Shantharaj Vs. ML Nagaraj AIR 1997 SC 2925. (iv) The decision of the Administrators calling for existing members to purchase 45 more shares of Rs.10 each, that is an additional infusing of an amount of Rs.450/- per member, is illegal because the members are forced to subscribe to an additional 45 shares and which would be applicable even to the persons who had become members prior to this decision seeking fresh infusion of Rs.450 from the existing members. It is contended that there cannot be “retrospective” application of the amendment i.e. the amendment cannot apply to the existing members and they cannot be forced to increase their share capital from 5 shares of Rs.10/- each i.e. a share capital of more than Rs.50/-. Of course, we may at this stage itself comment that we have failed to understand what is the „retrospectivity‟ about seeking an additional minor contribution of Rs 450/- from the existing members. In sum and substance, the objection is that the existing members should not be forced to contribute an additional amount of Rs.450/- per member. W.P.(C) No.1963/2010 Page 12 of 23 11. The counsel, appearing on behalf of the Administrators, respondent Nos. 3 to 5 and also the successful bidders, M/s. Writers and Publishers Ltd., respondent No.7 have disputed the arguments and contentions as raised on behalf of the petitioners. It has been contended that the Central Registrar cannot be denuded of his power to suo moto amend the Bye Laws once they are in accordance with the cooperative principles and in accordance with the provisions of the said Act and the Rules made thereunder. It was contended that the Central Registrar, in fact, has acted in furtherance of the orders of the Supreme Court which were binding on him as the orders of the Supreme Court were passed under Article 142 of the Constitution. It was also contended that there is no grave prejudice caused to the petitioners because the suo moto amendments which have been carried out are logical and are also in furtherance of the existing Bye Laws of the cooperative society as also the orders of the Supreme Court and the provisions of the said Act. It was further argued that a dispute raised when an additional amount of just Rs.450/- is asked from each member, the same is an issue of “much ado about nothing” inasmuch as an amount of Rs.450/- as on today‟s date is such a miniscule amount that any cavil should be rejected as one seeking to raise an insignificant issue and it was urged that such arguments in fact shows the malafides of the petitioners and that this Court ought not to interfere in exercise of its jurisdiction under Article 226 of the Constitution of India. Finally, it was argued that the appointment of the Administrators cannot be W.P.(C) No.1963/2010 Page 13 of 23 challenged because the appointment of the Administrators is pursuant to the wide powers existing under Section 123 and is not limited only to violation of instructions issued under Section 122, and which is only one of the grounds for appointment of Administrators. It is contended that in any case, once the Supreme Court has passed orders specifically observing that the same have been passed under Article 142, it is no longer open for the petitioners to claim that the appointment of the Administrators is illegal inasmuch as the appointment is in furtherance to the revival scheme of the cooperative society. It is contended that anything and everything which was required to be done was keeping in mind the predominant object of the revival of the cooperative society is the sole test and guiding factor and the appointment of the Administrators being in furtherance to the revival of the cooperative society, no challenge can be laid to their appointment, especially because they are the Administrators, who are the nominees of the successful bidder and as per the orders of the Supreme Court it is the successful bidder who has to take charge, control and be in effective management of the cooperative society. 12. Sh. A.S. Chandhiok, Learned ASG, appearing for the UOI, states that the orders of the Supreme Court must be implemented. He also referred to the fact that the Administrators were appointed pursuant to the letter dated 23.4.09 in furtherance to the orders of the Supreme Court and in terms of the language of the order of the Supreme Court. So far as the issue of amendment W.P.(C) No.1963/2010 Page 14 of 23 of the Bye Laws is concerned, it was contended that the suo moto amendment of the Bye Laws was not correct and the Central Registrar ought not to have amended certain Bye Laws on his own. It was also argued that the amendments which were made by the SRGB were otherwise correct and that they need not have been amended by the Central Registrar. It was finally argued that the Official Liquidator continues to exercise the powers even after the appointment of the Administrators. 13. The workers union have also been heard by us, though, we feel that the workers union cannot have anything to say except that the revival scheme must necessarily go through, because after all it is at the instance of the workers that a revival scheme came in contemplation and operation with respect to the cooperative society. 14. We are of the opinion that the writ petition must fail and none of the reliefs as prayed for by the petitioners can be granted. 15. At the outset we must hold that we fail to understand as to how three SRGB members can at all claim to represent the entire SRGB and only the majority whereof could have disapproved the suo moto action of the Central Registrar in amending the Bye Laws. The petitioners can at best seek enforcement of their rights as SRGB members, however, they cannot extend W.P.(C) No.1963/2010 Page 15 of 23 the scope of this writ petition as having been filed on behalf of the entire SRGB. Further, the most important, all pervading and all permeating fact is that revival of the cooperative society has to be done and nothing should be done which brings about obstructions in the revival of the cooperative society. One aspect in the revival of the cooperative society is that the successful bidder has to be in the management and control of the cooperative society and which is the very basis of going ahead with the revival scheme as noted by the Supreme Court in its orders dated 26.7.06 and 12.12.06. These orders specifically require the successful bidder to be in sufficient control of the management of the cooperative society and enjoy a legal status by duly amending the necessary Bye Laws so that the objective of the successful bidder being in control and management of the society is achieved. After all, why would a successful bidder infuse huge funds of a few hundred crores unless the bidder has the necessary control and management of the cooperative society. It may be noted that the Supreme Court in its order dated 26.7.06 noted that it is for this very reason that M/s. Reliance Industries had opted out of the process of revival of the cooperative society. The Supreme Court, had, in fact, even contemplated amending of the said Act and the Rules to deal with the exceptional situations which were faced qua the cooperative society. W.P.(C) No.1963/2010 Page 16 of 23 Further, we also feel that in terms of Section 123(3) of the said Act, once Administrators take charge and control of the cooperative society, and whose appointment has been approved by the Supreme Court in its different orders by extending the term of the Administrators, except the Administrators no one else can represent the interest of the cooperative society. It is necessary, at this stage, to refer to the said Section 123(3) and which reads as under: “123. Supersession of board of specified multi-State co- operative society.- ..... (3) The administrator shall, subject to the control of the Central Government and to such instructions as it may from time to time give, have power to exercise all or any of the functions of the board or of any officer of the specified multi-state co- operative society and take all such actions as may be required in the interests of the society.” ..... The aforesaid provision makes it clear that the Administrators take over not only the functions of the Board but also the functions of any of the officer of the Multistate Cooperative Society i.e. including an SRGB member and it is fully entitled to take all actions in the interest of the society. We may also at this stage mention that the Administrators are functioning in order to put the new Board in control of the cooperative society and which new Board has to be of the successful bidder because the Supreme Court has made it more than abundantly clear that the successful bidder will be in charge of the control and